Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

SOUTH YORKSHIRE LIGHT RAIL TRANSIT BILL.

Lords amendments agreed to.

Oral Answers to Questions — EMPLOYMENT

Employment Training Scheme

Mr. Patrick Thompson: To ask the Secretary of State for Employment if he has received any representions from the National Union of Public Employees concerning the employment training scheme; and if he will make a statement.

Mr. David Nicholson: To ask the Secretary of State for Employment if he has received any representations from the National and Local Government Officers Association concerning the employment training scheme; and if he will make a statement.

The Secretary of State for Employment (Mr. Norman Fowler): I have received no individual representation, but I very much regret that these unions and the Trades Union Congress have decided to oppose employment training. In doing this they are attempting to deny long-term unemployed people the opportunity of training that will help them back into jobs.

Mr. Thompson: Does my right hon. Friend agree that NUPE is wrong to suggest that this scheme, which will benefit 600,000 unemployed people with training in a year, is just working for benefit? Should it not take the advice of the Leader of the Opposition and give the scheme its wholehearted support? Does my right hon. Friend expect that view to be supported by Opposition Members this afternoon?

Mr. Fowler: On the latter point, we shall have to wait and see. I confirm again that this is a voluntary programme. So far about 130,000 long-term unemployed people have said that they are interested in employment training, and 60,000 are in training, so the programme is off to a good start.

Mr. Nicholson: Given the undoubted value of employment training, does my right hon. Friend agree that trade unions and local authorities that are opposed to it are betraying the unemployed? Is he satisfied with the conversion of expressions of interest into genuine training courses?

Mr. Fowler: The early indications are that the answer to the second part of my hon. Friend's question is yes. We believe that things are going satisfactorily and encouragingly. By their votes during the autumn the TUC and the Labour party have turned their backs on the long-term unemployed. They have done that when there are 700,000 vacancies in the economy. That is what they have to explain.

Mrs. Mahon: Does the right hon. Gentleman agree that this silly game of union bashing has to stop and that a considered decision was taken by the TUC and NUPE on the employment training scheme? They would not subject the unemployed to a workfare scheme that would force people into slave labour the like of which has not been seen since the 19th century.

Mr. Fowler: The hon. Lady must decide whether she is backing the leader of the Opposition, for it was he who urged the TUC to back employment training. Had we had an ounce of leadership from the Opposition Front Bench, the TUC vote may have gone a different way.

Mr. Andrew Welsh: Is the right hon. Gentleman aware of the difficulties that community care schemes experience in obtaining funding under the new employment training scheme? What steps is he taking to secure the future of such schemes, which help the elderly, the handicapped and other important groups? The schemes are valuable to individuals and families. How can their long-term future be secured?

Mr. Fowler: I shall consider any individual cases, but the figures available so far show that voluntary bodies have about 100,000 places on the new employment training programme. In other words, more places are given to voluntary organisations under ET than under the old community programme.

Mr. Burt: Does my right hon. Friend share my concern and disappointment for those who were expecting training in the Bury metropolitan area, where the labour-controlled council, which previously expressed its desire to join the scheme, only last week took a policy decision to make a U-turn, no doubt under the influence of some Opposition Members and some members of the TUC? Is that not a denial of essential training for people in my constituency?

Mr. Fowler: Yes. It is regrettable when that takes place. The only thing that can be said is that we are finding it possible to provide training to replace the training that would have been provided by the local authorities. However, nothing that I say takes away from the blame that should attach to local authorities which have turned their backs on unemployed people.

Mr. Meacher: If ET is so good, why in many areas is the drop-out rate more than 50 per cent. after the first interview? Is it because the training is of such poor quality, is it because the allowances are so insultingly low, or is it because there is a smell of creeping compulsion about this scheme? Will the Secretary of State give the House what he has so far consistently refused—a guarantee that the scheme will remain voluntary at least for the lifetime of this Parliament; and if not, why not?

Mr. Fowler: In answer to the first question, I said that it was a voluntary programme, but it is subject to the


normal availability for work rules. That is the normal condition for any receipt of social security benefit. The fact that 130,000 people have expressed interest in the programme at jobcentres and that 60,000 are now on the programme speaks for itself. At some stage the hon. Gentleman has to tell the country whether he backs the Leader of the Opposition, who supported employment training. His weakness in leadership has put the Labour party and the TUC in an utterly ridiculous and impossible position.

Employment Training Scheme

Mr. Lewis: To ask the Secretary of State for Employment how many people are currently participating in employment training.

Mr. Fowler: Employment training has got off to an excellent start. As at 14 October there were 60,000 people in training with training managers.

Mr. Lewis: Is the Secretary of State aware that his performance this afternoon will be greeted with derision by training agents and training managers throughout the country, who are complaining bitterly about the shortfall in trainees and about the 50 per cent. drop-out rate mentioned by my hon. Friend the Member for Oldham, West (Mr. Meacher)? It is a disgrace.

Mr. Fowler: There is no 50 per cent. drop-out; there are no such figures. I can guarantee with absolute certainty that training agents and training managers would not regard the hon. Gentleman as their spokesman in these matters.

Mr. Bowis: Can my right hon. Friend supply the figures for disabled people who are benefiting from the training? Will he ensure that there is careful monitoring of the scheme as it progresses, to ensure that such people benefit from training to enable them to participate in the jobs that are being created in our expanding economy?

Mr. Fowler: Yes. We shall do everything in our power to enable disabled people to benefit from the training programme. Nothing is more important than that we should do that. It is written into the employment training programme, and we shall monitor it as we go along.

Mr. Wallace: What assessment has the Secretary of State's Department made of the demand from women who, because of domestic commitments, have not registered as unemployed and available for work? Is he satisfied that adequate provision is being made to meet that demand?

Mr. Fowler: As the hon. Gentleman knows, there is provision for such women, but, again, we shall want to assess that. It is certainly part of the Government's policy to seek to bring about conditions that will encourage women to return to the labour market. The labour market will need them in the coming years.

Mr. Brandon-Bravo: Will my right hon. Friend join me in welcoming the initiative of Nottingham Network, established under ET? Network aims to give tuition to small businesses by offering practical and sound financial advice. Does my right hon. Friend agree that we have a

very long way to go in establishing one-man and very small businesses to help in our campaign to reduce unemployment?

Mr. Fowler: Yes. I believe that the Network programme in Nottingham to which my hon. Friend referred is a very promising development. I look forward to its providing more employment in that very important city.

Ms. Short: Perhaps I can help the Secretary of State by reminding him of what my right hon. Friend the Leader of the Opposition said at Bournemouth. He said that ET was a rotten scheme and he advised the trade unions to stay in it to try to make it better. The Secretary of State then closed down the Training Commission and kicked out the trade unions, so he should not quote my right hon. Friend the Leader of the Opposition as being on his side.
Will the right hon. Gentleman confirm what the Financial Times told us on 17 October: that his Department has issued a confidential circular saying that the priority of restart interviews for the unemployed is, at the first stage, to push people into employment training and, at the second stage, if those people do not take up such training, to find out why not? Is that happening because the right hon. Gentleman is frightened that the unemployed do not like his scheme?

Mr. Fowler: One of the options for unemployed people at a normal restart interview is employment training. There are other options as well. If at the restart interview someone says that he is going to employment training but does not turn up, it is reasonable for the Department to find out why.
On the hon. Lady's first point, she knows as well as everyone that had the Labour party, especially the hon. Lady and the hon. Member for Oldham, West (Mr. Meacher), taken a more constructive view on employment training there would have been an entirely different outcome. I am not prepared to take lectures from the hon. Lady. The Labour party has turned its back on the unemployed, and the public recognise that.

Labour Statistics

Mr. Favell: To ask the Secretary of State for Employment if he will make a statement on the latest unemployment figures for Stockport.

The Parliamentary Under-Secretary of State for Employment (Mr. John Lee): In September 1988 the number of unemployed claimants in the Stockport local authority district was 9,300—a fall of 3,000, or 24 per cent., over the last 12 months.

Mr. Favell: In Stockport, within the framework set by the Government, councils and colleges, employers and employees, commerce and industry have combined to create jobs. Are there not lessons to be learnt from that? Is it not remarkable that city councils, such as Manchester, which profess to be anxious to help the underdog should kick him when given the opportunity to help him?

Mr. Lee: As my right hon. Friend the Secretary of State has just said, it is sad that a minority of councils have turned their backs on the unemployed and are not participating in employment training. I am glad to say that, as my hon. Friend has intimated, Stockport city


council is playing a full part. It has a 500-place ET scheme, which is 95 per cent. full. I am delighted with the co-operation between the Stockport city council, education and the private sector.

Mr. Tony Lloyd: Will the Minister turn his attention to the point that while Stockport is the most favoured part of Greater Manchester, and although the small decrease in unemployment is obviously welcome, unemployment in the centre of Greater Manchester has not decreased? People have been pushed off the register, but there has been no real increase in employment. The local authority has a role to play and Stockport city council will play its role. When will the Government do something positive about mass unemployment in the centre of Greater Manchester?

Mr. Lee: I do not believe that a 24 per cent. reduction in unemployment in Stockport is a small fall. There has been a fall in unemployment in Manchester from 13·2 per cent. to 10·9 per cent. in the past year. As the hon. Gentleman knows, although there are pockets of inner-city unemployment in Manchester, by and large Manchester's economy is vibrant and buoyant.

Mr. Jack: Does my hon. Friend agree that the economic factors that have brought about Stockport's fall in unemployment have also resulted in lower unemployment throughout the north-west of England? Private enterprise has contributed to that good news. Does my hon. Friend agree that that is a more positive contribution to reducing unemployment than some of the far-fetched plans of some local authorities, such as Labour-controlled Lancashire?

Mr. Lee: My hon. Friend is right. There is a tremendous feeling of optimism, pride and confidence throughout the north-west.

Trades Union Congress

Mr. McAvoy: To ask the Secretary of State for Employment when he next plans to meet the Trades Union Congress; and what subjects he proposes to discuss.

Mr. Fowler: I have no immediate plans to meet the TUC.

Mr. McAvoy: I thank the Minister for that answer. When eventually he meets the TUC, will he explain why the Government have removed from workers at GCHQ the fundamental right to belong to a trade union? Is he aware that those workers were commended for the part that they played in the Prime Minister's Falklands war? What possible excuse could the Government have for their attack on the rights of those workers and that slur on their patriotism?

Mr. Fowler: That was clearly the subject of a statement by my hon. Friend the Minister of State, Foreign and Commonwealth Office, who has responsibility for it. [Interruption.] The hon. Member for Oldham, West (Mr. Meacher) should listen. As my hon. Friend said, action is necessary because, in the period 1979 to 1981, 10,000 days were lost at GCHQ as a result of industrial action.

Ms. Short: Two days.

Mr. Fowler: I do not believe that any Government could stand by and allow that kind of action to take place in a security installation.

Mr. Latham: Is it not extraordinary that, even in the depths of the recession, some industries were reporting major skill shortages? Should that not be discussed with the TUC so that we can give our training programme, and especially some of the remaining training boards, a jolly good shake up?

Mr. Fowler: Yes, it would be sensible for the Government and the TUC to discuss that aspect. NEDC is one area where we have been talking about just that. I underline what my hon. Friend has said. There are indeed skill shortages, and this emphasises the need for more training in this country.

Mr. James Lamond: Should not the Secretary of State be seeking a meeting with the TUC to apologise for the constant repetition by him, by other Ministers and by Tory Back Benchers of the claim that the TUC has turned its back on the unemployed, when he and those Ministers and Back Benchers were responsible for creating long-term unemployment, constantly denying having any responsibility for it and doing absolutely nothing about it except to make 24 changes in the method of counting in order to have a cosmetic effect on the figures?

Mr. Fowler: The Government have put forward the biggest training programme for long-term unemployed people not just in this country but anywhere in western Europe and are devoting a substantial amount of public finance to it. The TUC at its congress voted to boycott the programme, so it has indeed turned its back on the long-term unemployed in this country, and the public understand that only too well.

Mr. Roger King: Were my right hon. Friend to seek to meet the TUC, will he highlight the contrast in the attitude of the trade union movement in this country and the opportunities for jobs by comparing the situation in Dundee, when it was hoped that a Ford plant would be set up there, with the enlightened attitude at Bridgend, where Ford will indeed be investing, thanks to the co-operation of the unions in providing the right environment for that investment?

Mr. Fowler: Again, my hon. Friend is right, certainly with regard to Bridgend and the attitude of the Transport and General Workers Union in Dundee, where the only result was to turn its back on literally a thousand jobs. The Labour party and the TUC are turning their backs on unemployed people in this country in all kinds of ways. If they want to show real concern for unemployed people, they need to change their policies on training and inward investment.

Mr. Meacher: Will the Secretary of State reconsider the disgraceful decision to sack workers at GCHQ for no other reason than that they are members of a trade union? When will the Government ever learn that the right to membership of a trade union is not just a hallmark but a gurarantee of a free society? If the Government are genuinely interested in rooting out the unreliable, when will the Secretary of State learn that it is trade unionists who are the patriots and old Etonians who are the traitors?

Mr. Fowler: The last comment was silly, even for the hon. Gentleman. I know that he is running very hard for the shadow Cabinet, but he cannot get away with that kind of comment. Union action was targeted on GCHQ to gain publicity for a whole range of other issues, and 10,000 days were lost at GCHQ.

Ms. Short: Two days.

Mr. Fowler: In my view, the action taken by the Government is entirely justified.

Action for Jobs

Mr. Hanley: To ask the Secretary of State for Employment if he will make a statement on the progress of the action for jobs initiative.

Mr. Lee: Action for jobs was launched in 1986 to raise public awareness of the wide range of help available through the employment, training and enterprise programmes of the Employment Department group.
Central to the campaign was the "Action for Jobs" booklet, and it is a measure of its success that more than 7·5 million copies of the booklet have been taken up.

Mr. Hanley: Does my hon. Friend agree that a recent study by the independent research organisation MORI has shown that advertising reaches those who need the services of the Department of Employment? Will he therefore continue to use advertising to reach those in need and not listen to the Labour party, which tends to think that any piece of good information reaching those who need it is called "political"?

Mr. Lee: Our action for jobs programme was a great success in raising awareness of our range of programmes, and within it we produced the first ever comprehensive guide to the whole range of programmes. We intend to continue in that way. Group publicity expenditure for 1988–89 is forecast at £49·5 million, or less than 2 per cent. of our overall programme spend.

Mr. Campbell-Savours: Is it not somewhat of an empty initiative for handicapped support organisations, such as Smile in Cumbria? Is the Minister aware that, following the phasing out of the community programme, it cannot employ people under the new training scheme? Is he further aware that it has had to approach Cumbria county council—rate and cash-strapped as it is—for additional funds? Does that not mean that the Government are with the one hand closing employment opportunities while with the other artificially trying to create them?

Mr. Lee: I am not aware of the programme to which the hon. Gentleman referred. The Department is spending about £3·5 billion this year on its overall employment and training measures and about £144 million on specific programmes to help the disabled.

Mr. Devlin: Will my hon. Friend take an early opportunity to thank the staff in the northern region who have done so much to promote interest in the action for jobs initiative? Will he congratulate them on the success of the Government's strategy in that region, where unemployment has fallen consistently for 26 months? In my constituency unemployment has fallen by about one third since 1987.

Mr. Lee: I am sure that when any of my ministerial colleagues next visit the northern region they will take up my hon. Friend's suggestion and praise the staff of the employment service for what they have achieved.

Earnings

Mr. Harry Barnes: To ask the Secretary of State for Employment what proportion of the adult work force earn less than £3·30 per hour.

The Parliamentary Under-Secretary of State for Employment (Mr. Patrick Nicholls): It is estimated from the new earnings survey that about 30 per cent. of the adult work force, including both full-time and part-time employees, earned less than £3·30 per hour in April 1988.

Mr. Barnes: Is the Minister aware that more and more people are falling below the Council of Europe decency threshold for wages? Is that not deliberate Government policy, being implemented through the abolition of wages councils, the fair wages resolution and the undermining of the labour market through YTS and ET? Is that not a disgrace, given the so-called economic miracle?

Mr. Nicholls: No. The hon. Gentleman referred to the so-called decency threshold, which was merely a recommendation by experts. Not one country within the European Community has adopted that definition. No useful purpose would be served by attempting to help the low-paid by artificially fixing the rate to which minimum pay should be geared.

Mr. Ian Bruce: Does my hon. Friend agree that the Government have greatly helped the low-paid by providing additional funds to encorage people to accept low-paid work so that they can get on the step ladder back to full employment? Is that not what we are trying to achieve? Does he accept that sometimes people have to take low-paid jobs to learn a skill and so move up the employment ladder and improve their lot and that of their families?

Mr. Nicholls: My hon. Friend is right. The Government have ensured, by various tax and social security measures, that the rate of pay of the lowest paid members of our society is at a better level than it has been for a great many years. He is also right when he says that the effect of the policies advocated by the Opposition would be to strangle at birth the new jobs that have enabled so many of our citizens to get back into the labour market.

Mrs. Margaret Ewing: Will the Minister tell the House what proportion of that 30 per cent. are female employees and how that squares with equality of opportunity and pay?

Mr. Nicholls: I can tell the hon. Lady that the incidence is higher for women than for men. Clearly, there are a number of reasons for that. One reason is that many women find that their work patterns fit naturally into part-time work and, by the same token, they will not be involved in overtime as well.

Mr. Conway: Can my hon. Friend tell the House how many extra people would fall into unemployment, and what a grievous effect that would have on the expanding employment market, if he were to follow the advice and logic of the Opposition?

Mr. Nicholls: My hon. Friend is right. I doubt that it could be completely quantified, but it is clear that if we were to reach the stage of fixing a minimum wage the effect would be to ensure that many employers would find it uneconomical to employ people and it would be impossible for people to get back on to the labour market.

Ms. Richardson: The Minister has failed entirely to tell the House that the new earnings survey reveals, yet again, that women earn only 62 per cent. of men's average earnings, so for every £1 that a man earns, a women takes home 62p. Is the Minister aware that at the moment there is a lobby of Parliament that is campaigning to ensure that there is no watering down of the concept of equal pay for work of equal value? Will he here and now give the House an undertaking that not only will that legislation not be watered down, but that it will remain more simple, so that more women can take advantage of it and claim what is rightfully theirs?

Mr. Nicholls: The hon. Lady is right to draw our attention to the fact that women in the labour market and women who wish to return to the labour market have particular difficulties, which should be catered for. Therefore, it is a pity that the employment training programme, in which the eligibility criteria have taken account of the need to be able to bring women back into the labour market, has been boycotted by the Trades Union Congress and some of her hon. Friends. Her remarks and those of some of her hon. Friends about the need to help women in employment will sound far more genuine when they can pledge their full support to employment training, as they should have done many months ago.

Jobcentres

Mr. Baldry: To ask the Secretary of State for Employment if he will make a statement on the future of the jobcentre network.

The Minister of State, Department of Employment (Mr. John Cope): As with any other Government activity, the jobcentres are kept under continuous review.

Mr. Baldry: Given not only the continuing falls in unemployment levels but the increase in some parts of the country in skill shortages, is it not time to think again about the role of the jobcentres, so that they become skills shops as well, where people can identify the skills that are needed in the local labour market and, equally important, where they can go to obtain training for those skills? Is it not also time to think about tying jobcentres more effectively into the training access points initiative and to think of ways in which new technology can better take the jobcentre network into the 21st century?

Mr. Cope: Yes, we are doing all that. We are currently implementing a new programme called SUPERVACS, which is a computer-based vacancy system which is now fully operational in the north-west and is being extended elsewhere. [Interruption.] We are introducing direct public access systems as well, which have been piloted in Glasgow and will be extended to the Docklands and Coventry, and we are also following up the suggestions that my hon. Friend made about skills.

Mr. Speaker: Order. I ask the House not to carry on private conversations, and certainly not to shout from a sedentary position when answers are being given.

Mr. Vaz: Does the Minister accept that, rather than contracting the jobcentre network, the Government should be expanding it, specifically for those who live in the outer areas of cities? Does he not accept that the prohibitive costs of transport prevent many people from travelling into inner-city areas to use the facilities offered by jobcentres? Will he give sympathetic consideration to the creation of mobile jobcentres to enable services to go to the outer areas and so ensure that the people who live there are treated in exactly the same way as those in the inner-city areas?

Mr. Cope: Yes, indeed, but it is part of the point of the computerised vacancy and direct access systems to which I referred that they make information available in public libraries and so on. The hon. gentleman asked about mobile jobcentres. My right hon. Friend the Secretary of State is to launch one next week.

Mr. Marlow: In view of the growing and justifiable anger and resentment at the large number of people in prosperous parts of the country who refuse to take available work, will my right hon. Friend change the availability for work rule and bring in instead a looking for work rule?

Mr. Cope: All sorts of new ideas come forward and we consider them all.

Part-time Workers

Mrs. Golding: To ask the Secretary of State for Employment what percentage of 16 to l9-year-olds were working part-time in 1979 and at the latest available date.

Mr. Nicholls: It is estimated from the labour force survey that 3 per cent. of people aged 16 to 19 in Great Britain were working as part-time employees in spring 1979. The equivalent figure for the spring of 1987 was 14 per cent.

Mrs. Golding: Is the Minister not aware that our young people want full-time jobs? They want full-time jobs with training; they want full-time jobs with work protection; they want full-time jobs with decent holidays and they want full-time jobs with a decent living wage. If he is aware of that, when will he provide such jobs for our young people, rather than force them into totally unsatisfactory, part-time, poorly paid jobs?

Mr. Nicholls: I am sure that those young people would not want to be generalised about and told what they are supposed to want. Only 9 per cent. of those young people gave as their reason for taking part-time work the fact that they were unable to find full-time jobs. There are all sorts of other reasons why young people may want part-time work. For example, they may be students who have decided to supplement their grants. The hon. Lady is entirely wrong to draw only one conclusion from the figures.

Mr. Bill Walker: Is my hon. Friend aware that many youngsters are employed part-time in the kind of work that is available in my constituency, where the tourist industry is the largest employer? Many of them work


part-time to supplement the allowances that they receive while they are at college or university, and we must encourage that.

Mr. Nicholls: I am sure that my hon. Friend is right. More than 80 per cent. of the increase between spring 1979 and spring 1987 was among students. Clearly, there is nothing wrong in students' deciding that they want to start to earn some money on a part-time basis as part of the process of making their way in life. There is nothing wrong in that, and obviously that is why Opposition Members condemn it.

Mr. Morley: Is the Minister aware that many young people are being exploited by firms through poor pay and poor conditions? Furthermore, as a direct result of the young workers' scheme, many of the firms that have exploited young workers are non-union firms and have intimidated and frightened them into not joining trade unions? When will the Government protect the rights of people to join the union of their choice rather than taking those rights away, as they have at GCHQ?

Mr. Nicholls: The question has nothing whatever to do with GCHQ. If the hon. Gentleman has firm evidence concerning the exploitation of the young, he should give it to the relevant authorities. I hope that he is pleased that more is being spent on training than at any time in the past; about £1·4 billion is now being spent, as opposed to £380 million when the Labour party was last in office. The figure has more than doubled in real terms.

Mr. Cyril D. Townsend: To what extent does my hon. Friend consider that the failure of young people to get full-time jobs is due to the low quality of education in some of our schools? If young people are turned out unable to read properly, to spell or to do simple arithmetic, how can they do the full-time jobs that arise in an advanced society?

Mr. Nicholls: If the state of a young person's education was so poor that he could not get a full-time job, I doubt whether he could get a part-time job either. However, my hon. Friend has given me the opportunity to make the point yet again that only 9 per cent. of young people gave as their reason for taking part-time employment the fact that they could not get full-time employment.

Mr. Cunliffe: We should not let the junior Minister get away with the complacency shown at the Dispatch Box today. Young people want full-time jobs. Young people want jobs with training. If those disgraceful figures that he has given to the House are combined with the fact that there are more than 100,000 young people at 16 in jobs with no training at all, that is a national disgrace. As the demographic downturn takes place during the next months. [Interruption.]

Mr. Speaker: Order. Hon. Members must ask questions.

Mr. Nicholls: Once again, that illustrates the pitfalls of writing one's diatribe before listening to the answers. There is nothing complacent about the information that I have given to the House.

Mr. Cunliffe: rose—

Mr. Nicholls: What I have given to the hon. Gentleman is fact. What he does not like is the fact that the Government's record for training both youths and adults

is extremely good. If the hon. Gentleman really cared about members of society who would benefit from training, he and his hon. Friends would be doing something about backing employment training.

Small Businesses

Mr. Moss: To ask the Secretary of State for Employment if he has any plans to meet the director-general of the Confederation of British Industry to discuss the development of small businesses; and if he will make a statement.

Mr. Cope: My right hon. Friend and I are in regular contact with the CBI to discuss issues affecting small firms and other matters.

Mr. Moss: As a result of the Government's enlightened policy towards small businesses, through deregulation and assistance, through such measures as the small firms advisory service, enterprise agencies and the enterprise allowance scheme, is it not true that successful small businesses are being created at an unprecedented rate?

Mr. Cope: Yes, indeed. The latest VAT statistics show that about 1,000 extra firms register for VAT every week.

Mr. Ieuan Wyn Jones: As small businesses have a substantial contribution to make to the reduction of unemployment in rural areas, may I ask what new initiatives are being considered by the Minister's Department, in consultation with the Secretary of State for Education, to make young people more aware of the benefits of setting up in business in those areas?

Mr. Cope: They are not specific to rural areas, but the technical vocational and educational initiative does exactly that job all over the country. Obviously, the Rural Development Commission has a particular responsibility for rural areas. Because of the importance of job creation in small firms, to which the hon. Gentleman correctly drew our attention, there are a number of enterprise training courses for young people, as well as for adults, to encourage them and to assist them in setting up small businesses.

Employment Training Scheme

Mr. McLoughlin: To ask the Secretary of State for Employment if any representations have been made to him by Derbyshire county council on the employment training scheme; and if he will make a statement.

Mr. Nicholls: Derbyshire county council wrote to my right hon. Friend in April setting out its opposition to employment training. I regret that negative attitude, but I am glad to say that we now have all the training places needed in the area.

Mr. McLoughlin: Will my hon. Friend be careful not to take any strictures from Derbyshire county council? Is he aware that it has just undertaken one of the most expensive job training schemes ever announced, in that it appointed as its chief executive a former Labour Member of Parliament at £46,000 a year? He had no training for the job and he had to resign. Does my hon. Friend think that the attitude of Derbyshire county council, if it spread to a national level, would do anything at all to help the people of this country?

Mr. Nicholls: My hon. Friend is right. If one looks at the attitude of that authority, one sees an attitude to the training of the long-term unemployed that is thoroughly reprehensible. I dare say that my hon. Friend has it in mind that when the Leader of the Opposition belatedly came out in favour of employment training, he was joined by the hon. Member for Oldham, West (Mr. Meacher), who was quoted the next day as saying that if, in fact, the TUC came out against employment training it would send the wrong message to the unemployed—indeed, it did. The message that it sent them was a slap in the face.

Part-time Workers

Mr. Michael: To ask the Secretary of State for Employment whether he has any plans to improve the rights of part-time workers to paid holidays, pensions, and overtime payments.

Mr. Nicholls: No. In general, terms and conditions of employment are matters best left for employers and employees or their representatives to determine. Pension rights are a matter for my right hon. Friend the Secretary of State for Social Security.

Mr. Michael: In view of his earlier answers, will the Minister accept that the Government are preparing people through training for part-time employment only? In this run-down economy, that especially applies to women. In the increase of those employed since 1983 there are 682,000 women out of a total of 974,000—that is 70 per cent. That offers little hope for women in the future. Part-time employment offers little hope or opportunity except to those whom it suits. All that many people want is a full-time job. When will the Government face their responsibility and provide those jobs?

Mr. Nicholls: Once again, the hon. Gentleman makes his point, but it has no basis in fact. If we were to accept the hon. Gentleman's thesis it would amount to a belief that any form of part-time employment is bad and that only full-time employment can be good. The labour market is extremely varied. Many people find that part-time employment is right for them and many see it as a stepping stone hack into full-time employment. Obviously I should not allow the hon. Gentleman's remarks to pass without wishing him, too, the very best of success in the shadow Cabinet elections.

Oral Answers to Questions — >PRIME MINISTER

Engagements

Mr. Macdonald: To ask the Prime Minister if she will list her official engagements for Tuesday 25 October.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today, including one with Prince Sihanouk of Cambodia. This evening I hope to have an audience of Her Majesty the Queen.

Mr. Macdonald: Given the Prime Minister's many previous answers to this question, does the right hon. Lady believe that it is right for the Bank of England to spend so much money on propping up the pound?

The Prime Minister: My right hon. Friend's policy, with which I wholly agree, is to do every single thing to try to get down inflation. The action that he has taken is the action that will do that and it will also succeed in getting down the balance of trade deficit.

Mr. Curry: To ask the Prime Minister if she will list her official engagements for Tuesday 25 October.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Curry: In view of the recent series of visits by Western leaders to the Soviet Union, and Mr. Gorbachev's manifest need of Western technology and finance to accomplish the economic reforms that he has promised, does my right hon. Friend believe that the provision of such aid by the West should be linked to progress on liberalisation in Eastern Europe and memorable progress on disarmament?

The Prime Minister: I agree that we very much want to encourage both economic and political reform in the Soviet Union. Indeed, we have been foremost among the nations doing so. I do not think that it is advisable to link that specifically to credits either to the Soviet Union or to Eastern Europe. First, I do not think that it would work; and secondly, we want to have as much influence as possible over them on human rights and such a link would be adverse to the maximum effects that we could have.

Mr. Kinnock: Last year, when the Prime Minister said that:
child benefit will continue to be paid as now, and direct to the mother",
had she decided then that child benefit was to be frozen, or did the decision to deceive come later?

The Prime Minister: I indicated from this Box that that particular phrase, which is to be found in the Conservative manifesto, would be honoured. The right hon. Gentleman will have the same reply as he had last week. He knows full well that there will be a statement on all uprating. He knows that it will come comparatively soon, either this month or early next month, and he really must wait to see what that statement says.

Mr. Kinnock: The Prime Minister is dodging again. On this occasion I think that we can safely regard her silence as an admission of guilt. The Prime Minister is a cheat. [Interruption.]

Mr. Speaker: Order. I did not hear the last word, but I hope that it was not unparliamentary. [Interruption.]

Dame Elaine Kellet-Bowman: Will my right hon. Friend—[Interruption.]

The Prime Minister: rose—

Mr. Speaker: Order. I did not hear the right hon. Gentleman's last word. I am certain that if it was an unparliamentary expression the right hon. Gentleman will rephrase it.

Mr. Kinnock: If you did not hear it, Mr. Speaker, the last phrase that I used was, "The Prime Minister is a cheat." [Interruption.]

Dame Elaine Kellett-Bowman: rose—

Mr. Speaker: I must advise the right hon. Gentleman that I do not think that that is a parliamentary expression—[Interruption.]—or one that we should use in the House. I ask the right hon. Gentleman to please withdraw it.

Mr. Kinnock: I respect your judgment greatly, Mr. Speaker, and on that basis I withdraw the word "cheat". [Interruption.]

Mr. Speaker: Order. I call Dame Elaine Kellett-Bowman.

Dame Elaine Kellett-Bowman: Will my right hon. Friend find time in her busy day to emphasise to her right hon. Friend the Secretary of State for Energy that if a proposal were to be put to him to store spent fuel from advanced gas-cooled reactors throughout the country on the borders of my constituency, the paramount consideration would be that of safety? Would it not be infinitely more sensible for each AGR station to store its own spent fuel rods on its own site?

The Prime Minister: As my hon. Friend is aware, a great deal of capital expenditure is being incurred at Sellafield in order to store spent fuel safely. Her proposal would be a fundamental change of policy which would have to be put to the appropriate authorities. I think that the present arrangements are the best.

Mr. Home Robertson: To ask the Prime Minister if she will list her official engagements for Tuesday 25 October.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Home Robertson: "Cheating" may be an unparliamentary expression but it seems uncommonly frequent in the conduct of this Government. If the Prime Minister will not answer in this Chamber the question put to her by my right hon. Friend the Member for Islwyn (Mr. Kinnock), will she come to Scotland to explain to 6,000 mothers in Govan why they should sacrifice again and see their child benefit frozen for the second year in succession in order to fund the £2 billion-worth of tax cuts that have been given to the richest 1 per cent. of people in this country?

The Prime Minister: The hon. Gentleman must wait until the uprating statement is made. May I remind him that last year a greater amount was spent on helping the poorest families by increasing their benefits than would have been spent on uprating child benefit as a whole. I should have thought that some Opposition Members would prefer a greater amount of money to go to young children, as happened last year. With regard to the future, the hon. Gentleman must await the statement which he knows will come.

Mr. Wilshire: As part of my right hon. Friend's ongoing, highly successful reforms of local government financing and service delivery, will she find time during the course of the day to send a message of support to the new Conservative administration on Bradford city council as it seeks to grapple with Socialist excess and Socialist waste?

The Prime Minister: Yes, I will gladly send a message of goodwill to that new administration. I hope that it will place the finances of that authority on a sound and

sustainable financial basis for the future, which will bring great credit to the new administration.

Dr. Owen: With the amounts of compensation for the Piper Alpha rig disaster very much under discussion, is it not time that something was done for the families of those who have lost their lives as a result of the IRA? Should not the Criminal Injuries Compensation Board be far more generous when we realise that the family of a Member of this House who lost his life four years ago in the Brighton bomb disaster was offered only £24,000 after three years? Does that not suggest that a lot more needs to be done for the victims of IRA bombings?

The Prime Minister: With regard to the right hon. Gentleman's point about Piper Alpha, as he knows, that has yet to be decided. I think that there is a delegation to my hon. Friend the Minister of State this afternoon to discuss the possible payment of costs on the inquiry. With regard to the IRA and the Criminal Injuries Compensation Board, I take note of his point and will pursue it.

Mr. Robert B. Jones: Will my right hon. Friend find time during her busy day to have discussions with Ministers from the Department of the Environment about the plight of the innocent victims of Socialism in Brent, where teachers are being thrown out of work and services cut because of the council's mismanagement? Is not the verdict of the electorate—a derisory 3·8 per cent. of the vote for the Labour party in an election last week—just and deserved?

The Prime Minister: Yes, I entirely agree. If local authorities run their finances badly it is the ordinary people who will pay for the consequences, and I hope that that lesson will be learnt.

Mr. Winnick: To ask the Prime Minister if she will list her official engagements for Tuesday 25 October.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Winnick: Will the Audit Commission be asked by the Government to inquire how the freehold of Tory Central Office was purchased from Westminster city council, or does the Prime Minister take the view that if British Aerospace can make so much profit from privatisation there is no reason why the Tory party should not also make a killing from the public purse? Has Ivan Boesky anything to learn from enterprise culture and from members of her Government?

The Prime Minister: The short answer to the hon. Gentleman's question is no, not as far as I am aware. With regard to privatisation as a whole, it has been brilliantly successful and greatly to the advantage of most employees.

Mr. Gregory: To ask the Prime Minister if she will list her official engagements for Tuesday 25 October.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Gregory: As the tax and prices index has shown such a modest rise as 3·9 per cent., thanks to this year's cut in income tax, will my right hon. Friend urge employers to take that into account, and particularly to give a boost to profit-related pay?

The Prime Minister: I agree that that factor should be taken into account. As my hon. Friend will have seen from the latest figures, the increases in average earnings are such that our unit labour costs are not quite as competitive as they have been with those in Europe. It is therefore vital that increases should be taken in relation to the profit that has been made. I hope that my hon. Friend will point out to employers that my right hon. Friend the Chancellor made special provision for less tax to be paid on amounts that are distributed from profits than would have been paid on straight increases in earnings.

Mr. Beith: To ask the Prime Minister if she will list her official engagements for Tuesday 25 October.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Beith: Will the Prime Minister now address herself before it is too late to the merits of child benefit, not the least of which is that, because it is not withdrawn as income rises, it does not create the kind of poverty trap that the switch of that aid to other benefits is likely to produce? If it is important that those who are already rich have an incentive to work, is it not also important that those who are at the bottom of the scale receive the full advantage of their own efforts to better themselves?

The Prime Minister: As the hon. Gentleman is aware, child benefit is composed of two factors: first, the old

family allowance, which was a plain, straightforward distribution to all families; and, secondly, the income tax allowance. The two were combined, and therefore child benefit has not only one quality.
The hon. Gentleman must wait for a statement on all upratings, including child benefit. Let me point out, however, that any indiscriminate benefit has a lot of what is called "churning", in that it takes money from one pocket, puts it through a bureaucracy and it goes into the other.

Mr. Allason: Is my right hon. Friend aware that many of my constituents who are victims of the Barlow Clowes affair are deeply grateful for the reported interest of my right hon. Friend in the report? Will she give her urgent support to the Department of Trade and Industry for the private sector's lifeboat to assist them?

The Prime Minister: Anything that the private sector decides to do will be welcome. There is, perhaps, some confusion when these matters are called lifeboats and are compared with what happened in the mid-1970s. At that time no taxpayers' money was ever involved. The Bank of England took action to put secondary banks into liquidity and the money was repaid. Alternatively, they were put into liquidation. That has absolutely nothing to do with the present circumstances. [Interruption.] I notice that Opposition Members are noisy. We remember how much many people lost when, under a Labour Government, the stock exchange crashed to 150.

Division List

Mr. John Browne: On a point of order, Mr. Speaker. May I point to an error in Hansard of 20 October, which shows me voting No in conjunction with my honourable namesake, the hon. Member for Edinburgh, Leith (Mr. Brown), in the defence debate last week? I would not raise the matter now had it not given rise to repeated press comment, most notably in today's issue of The Daily Telegraph. I should be most grateful if the error could be corrected.

Mr. Speaker: I can confirm that the hon. Gentleman voted Aye in the Division. in question and that his name mistakenly appeared twice, showing him to have voted in both Lobbies. I understand that the hon. Gentleman has received an apology for this error.

Ministerial Answers

Mr. Dennis Skinner: On a point of order, Mr. Speaker. You will have noticed during Prime Minister's Questions that when my right hon. Friend the Leader of the Opposition asked his second question, the Prime Minister refused to answer. Can we construe from that that she is exercising her right to be silent before she abolishes it?

Mr. Speaker: I am not responsible for what people say, or do not say, in this Chamber, provided that it is in order.

Limitation of Speeches

Mr. Bill Walker: On a point of order, Mr. Speaker. May I draw your attention to the fact that during last week's defence debate several hon. Members sat throughout both days' proceedings without having the opportunity to speak? Will you give serious consideration to applying the 10-minute limit every time we have large numbers wishing to speak?

Mr. Speaker: I share the hon. Gentleman's concern. With hindsight I might have applied a 10-minute limit on both days, but last year fewer hon. Members wished to speak on the second day. I note what the hon. Gentleman has said, and I shall comment on this matter again shortly.

Consumer Protection (Registration of Professional Chemists)

Dr. Michael Clark, supported by Mr. Donald Anderson, Mr. Malcolm Bruce, Mr. Ted Garrett, Mr. Tim Janman, Mr. Michael Lord, Mr. Patrick McNair-Wilson, Mr. Austin Mitchell, Mr. Gordon Oakes, Sir Trevor Skeet and Mr. Nicholas Winterton, presented a Bill to extend and entrench the protection of the consumer by means of a system of statutory registration of professional chemists; to protect the public interest by achieving higher standards of practice within the profession of chemistry and to highlight the skills of members of the Royal Society of Chemistry; and for purposes connected thereto: And the same was read the First time; and ordered to be considered tomorrow and to be printed. [Bill 218.]

State of the Economy

Mr. Speaker: I must announce to the House that I have selected the amendment in the name of the Prime Minister. Further to the point of order raised on the 10-minute limit on speeches, as this is an additional Opposition day, the Chair has no formal power to enforce a 10-minute limit, but I think that it would be right, and for the convenience of the House, if speeches were limited to 10 minutes between 6 and 8 o'clock, in the hope that hon. Members who speak after that time will not exceed the limit. I hope that I have the agreement of the House for that suggestion.

Mr. Gordon Brown: I beg to move,
That this House condemns the Government's mismanagement of the economy, which has produced record balance of payments and trade deficits, damaged the country's trading and industrial interests, and brought high interest rates as the Government's only response, with resultant higher costs for homebuyers and for industries trying to compete in home and foreign markets; is concerned by the failures of supply side policy which mean that British industry is not properly equipped to meet current demand or future challenges; insists that the Government must not make public expenditure on investment, services and welfare, including Child Benefit, a victim of its own incompetence; and calls upon Her Majesty's Government to adopt an effective strategy for investment in economic efficiency and social justice for the United Kingdom.
It is now seven months since the Chancellor came to the House at the end of the Budget debate in March and told us that he was presiding over an economic miracle. These have been seven months during which, with real interest rates among the highest in Europe and inflation rising to the highest in Europe, every major forecast and assessment that the Chancellor has made has been proved wrong.
The right hon. Gentleman told us in March that inflation would be 4 per cent. Now that it has risen to nearly 6 per cent. his only response is to tell us that it will rise for many months to come, making this the longest temporary blip in history. He told us in March that imports would rise by 7 per cent. this year. They are now rising twice as fast as that—by 15 per cent. He told us in March that the trade deficit would be £4 billion. Now that it is rising above £10 billion it has worsened three times faster than he predicted. He told us that savings would rise because of his top-rate tax cuts. Now they have fallen. He told us that unemployment would fall throughout the year. Last month it started to edge upwards. He told us in March that interest rates were just about right. They have risen eight times to 12 per cent. He told us in March that the money supply would increase within a range of 1 per cent. to 5 per cent.; possibly by as little as 1 per cent. Now that it is rising by 8 per cent., this favoured indicator of the earlier years was not even considered worth a mention in the Chancellor's Mansion House speech.
Historians will be interested to know what special powers the Chancellor has over the Prime Minister that she should witness these appalling errors and then describe them as brilliant, wonderful and marvellous. The right hon. Gentleman was wrong about inflation, about interest rates, about imports, about savings, about trade deficits and about the money supply, and his response is to tell us that what we need is self-discipline—not from him, but from everyone else who borrows and spends. These problems could have been averted if the Chancellor had practised some self-discipline himself—

Mr. Peter Thurnham: The hon. Gentleman talks of the need for self-discipline. In view of his party's wild promises to spend money, will he say how much more than £38 billion his party would now spend?

Mr. Brown: I do not know from where the hon. Gentleman gets his figures, but they are clearly wrong. If he produces a list for me I shall look at it, but I can tell him that there are no such commitments.
In November last year the Chancellor told us that the pound was just about right at about 3 deutschmarks. He told us in March that, at 3·07 deutschmarks, it was unlikely to be sustainable. In April he told us that the pound, then at 3·10 deutschmarks, would not rise much further. Since then it has been as high as 3·22 deutschmarks, and even now it is at about 3·14.
What does the right hon. Gentleman say about that and about all his other forecasts? Does he say that they were unfortunate, or ill advised? Does he say that he was over-optimistic? No. Now that all his forecasts have failed, his response is to try to do away with forecasting. Most of us would say that the proper response is not to discard the Chancellor's forecasts, but to keep the forecasts and discard the Chancellor. His forecasts have been wrong because his strategy has been wrong, and as the teenage scribblers who criticise him now include not only commentators in the City but senior Back Benchers on both sides of his party, his strategy should have been different and clear from the beginning.
When there was a boom and overheating in the south-east, when that overheating was creating inflationary pressures in its wake, when demand in the economy was outstripping our capacity to supply it, and when, most of all, despite the rise in investment this year, investment has been rising far more slowly than consumption over the past nine years, the Budget should have been as we told the Chancellor at the time: a Budget for investment. In March, when there was an imbalance between investment and consumption, we told him that he should have chosen to boost investment. When there was an imbalance between the south-east and the regions, we told him that he should have chosen to boost the regions, to the benefit of both. Instead, he boosted consumption at the expense of investment, and the south-east at the expense of the regions, to the detriment of both—

Mr. Tim Smith: The hon. Gentleman talks about investment. Is he aware that manufacturing investment is rising by 13 per cent. a year? When did it ever reach that level under a Labour Government?

Mr. Brown: I am grateful to the hon. Gentleman for allowing me to educate him about the real levels of investment in the economy. Is he not aware that it is now nine years since the Government came to power and that manufacturing investment, in real terms, is now only just creeping back to the level of 1979? Can he name any other comparable competitor country that has put itself in that position, especially as it is this country that had North sea oil and it is this country that should have used it to invest?

Mr. Roger King: The picture that the hon. Gentleman is painting is of great gloom and despondency. Why, then, it is that the Ford motor company, a multinational, has selected south Wales to


invest in its largest ever production capacity? Is it because there are opportunities here that are not available anywhere else?

Mr. Brown: I am grateful to the hon. Gentleman and hope that he will join me in congratulating the workers in Wales. I should like to point out to him that the finance director of Volkswagen said only a few days ago that although wage rates here are 45 per cent. lower than in Germany, he could not contemplate investing here because the skills in Germany were far superior as a result of their investment in education and training.
The tragedy is that, because of the Chancellor's mistakes, his top-rate cuts for a few in March have been paid for in the mortgage and price rises of the summer and autumn and are now, we fear, to be followed by public spending and child benefit cuts in the Autumn Statement and during the winter.
Let us look at the impact of what the Chancellor has done this year on families up and down the country. We know that many of the 7 million who depend upon housing benefit and income support are already worse off as a result of the changes following the social security reviews. We know also that pensioners, who received only a 4·2 per cent. rise in their pension last year, and who will receive only a 5·9 per cent. rise this year, now find that their pensions just cannot keep pace with the prices that they have to pay.

Mr. Tim Yeo: Has the hon. Gentleman forgotten what the Labour Government did to pensioners by switching from the historic to the forecast method of uprating? Will he tell the House what happened to pensioners under the Labour Government?

Mr. Brown: I shall tell the hon. Gentleman what the previous Labour Government did. They linked pensions to earnings. They raised pensions in line with earnings. Let me tell the hon. Gentleman that the result of breaking that link between pensions and earnings has been to take a cumulative total of £18 billion from pensioners over the past nine years. When the Chancellor boasts about the fiscal surplus, let him remember that it has been attained on the backs of the pensioners.
We know that over this year households have been faced with price rises that are higher than even the ordinary levels of inflation—11 per cent. rises in electricity prices, 10 per cent. in water, 10 per cent. in rail and tube fares, 12 per cent. in rates, 6 per cent. in gas and 8 per cent. in prescriptions—rises that are well above the ordinary levels of inflation for basic goods. Those rises make many thousands of families worse off. We know also—

Mr. Michael Shersby: Will the hon. Gentleman give way?

Mr. Brown: I am trying to give information about what is happening to people up and down the country. If Conservative Members will listen, they might be able to represent their constituents a great deal better.
We know that for millions of families at, below or just above the average income, the tax cuts of the spring have also been wiped out by the mortgage rises in the summer and autumn. Their tax cut, averaging £4 a week, became £3 after the electricity and gas price rises and £2 after the

rate rises, the rises in train and underground fares and the water rate rises. That £2 has been wiped out altogether by mortgage rises.
Average wage earners may have had £12 a month in tax cuts, but they will see their mortgage repayments rise by £30 a month once these are fed through into the demands upon them. First-time buyers, who received around £7 a week in tax cuts, will see their mortgage repayments rise by an average of £38 a month once they feed through. First-time buyers in the south-east, especially those in London, received an average of £21 a month in tax cuts, but now their average mortgage repayments are rising by about £70 a month. What people gained in tax cuts they have now lost in price rises and mortgage increases. The tax handout was followed by the mortgage clawback. The mortgage clawback, although delayed, was an inevitable consequence of the tax handout. The spending power that the Chancellor appeared to offer in the spring was reined back in the summer and is now substantially reduced for the autumn and winter.
This is the first Chancellor in history to give £6 billion in tax cuts and make the majority of families worse off. Having created these problems by his misjudgments in the spring, his response in the autumn is to compound his errors by threatening public spending and by refusing to face his responsibilities for health, housing, education, transport and investment in our economy generally.
We know that there has been overheating and overspending, a credit explosion and a consumer boom, and we know about the economic imbalances that have resulted. There is no overheating in the Health Service, no overspending on our schools and no explosion of credit for hospital or other community building. There is no consumer boom among pensioners and low-income families. The economic imbalances that we face arise not from an excess of public expenditure on those who need it and are entitled to it, but from the extravagance of unnecessary tax cuts for those who are already well off.
If top-rate taxpayers are spending too much on imports, it cannot be the right response to cut spending on hospitals and schools. If the south-east is overheating, it cannot be right to cut investment in the regions. If the economy is unbalanced because of the Chancellor's selective generosity towards a few, it cannot be the right response to cut child benefit for millions of people.

Sir John Stokes: We have been listening to the hon. Gentleman for 16 minutes. May we hear his remedies? Will he put up taxes? Will he renationalise industries? Will he reduce our defences?

Mr. Brown: I have made it absolutely clear to the hon. Gentleman and to the House that it is the imbalances in the economy created by the Chancellor's policies that have caused so many of our problems. We are calling for an Autumn Statement about investment and, if necessary, that would have to be paid for by withdrawing the top-rate tax cuts.
Nothing is more revealing about the Government and their priorities than that they should consider freezing child benefit and putting it in second place after top-rate tax cuts. The Chancellor is prepared to hand out billions in top-rate tax cuts to those who are very rich. He gave people at the top £10,000 a year for each year since 1979, and has added to that an extra £12,000 a year in his Budget. He had added to that cuts in inheritance tax for


those who are well off and cuts in capital gains tax. He did that to such an extent that while the wages and standard of living of many people are starting to fall because of mortgage rises and price rises, people at the top on unearned income are receiving rises not of 10 or 20 per cent. but of 30, 40 or 50 per cent. The Chancellor is prepared to give people at the top on unearned income rises of 30, 40 or 50 per cent., but is not prepared to uprate child benefit even by 45p a week in line with inflation.
Can the Chancellor explain to the House and to the 6 million mothers and 12 million children who depend on child benefit why he cannot uprate it, even when it is known to be the most effective, economical and efficient means of relieving family poverty? He knows that child benefit has a 100 per cent. take-up. while family credit has only a 50 per cent. take-up. He knows that child benefit reaches all poor mothers, while family credit gets to only 250,000 of them. Will he explain why he cannot uprate child benefit in line with inflation when that uprating could be paid out of his £3 billion in tax cuts for those who are very rich, and still leave £2·75 billion?
We have done an analysis of some of the spending implications of the child benefit decision. This year, 2,000 wealthy citizens will gain as a result of cuts in inheritance tax and the reliefs for it. That tax relief is exactly equivalent to the amount needed to upgrade child benefit for 12 million children. We are talking of 2,000 people at the very top, against 12 million children throughout our country. I say that a civilised society would use its cash for 12 million children who deserve it, not for 2,000 taxpayers who do not.

Mr. Neil Hamilton: The hon. Gentleman has been commenting adversely on tax cuts for the rich. Can he explain why he wants to give benefits to them indiscriminately?

Mr. Brown: What we know is that child benefit goes to all who need it. We know that it does not raise problems of marginal tax rates. We also know that child benefit, which goes to 6 million mothers and 12 million children, is a universal benefit that goes to mothers. There is no other benefit like it. Conservative Back Benchers who now diminish the case for child benefit are doing a great disservice to their colleagues on the Back Benches who have supported child benefit for many years and to many of their colleagues in the Cabinet who support it now.
I remind Conservative Back Benchers who, in the past, when it came to uprating matters, have given Ministers the benefit of the doubt, but who will find that there is now doubt about the benefit, of what the then Chancellor said in 1983 when he uprated child benefit. He said that it
plays a major part in easing the unemployment trap … improving incentives for everyone … is important for families, and particularly for the low paid … provides the greatest help to many of the poorest families in the country."—[Official Report, 15 March 1983; Vol. 39, c. 143.]
What has changed? Has the case for child benefit changed? Has the argument changed? Has the need for child benefit changed? Or is what has changed the submissiveness of the majority of Tory Back Benchers, whom Ministers can now override with impunity?
This is a Chancellor whose family policy is freezing child benefit, imposing a poll tax that will split up families, cutting investment in nursery schools, taking teenagers off benefit although there are no youth training scheme places for them to take, reducing investment in education and

imposing charges for eyesight tests and dental check-ups. He is a Chancellor who will do the groundwork for doubling school meal charges in places such as Bradford, as has happened today. He says that his party is the party of the family. Is there anything more damaging to family life than a failure to provide for decent schools, a decent Health Service and a decent level of child benefit?
Public services and home owners are not alone in being hit by the Government's ill-judged strategy. It affects industry too. High interest rates, which have already added £1 billion to industry's costs, and volatile exchange rates will make it even more difficult for industry to export, and the Confederation of British Industry has already criticised them in many of its conference motions, but the one instrument that the Government choose to use—high interest rates—is the one that does most damage to industry.

Mr. John Townend: rose—

Mr. Brown: I am not giving way again.
The policies that the Government think right for Britain are actually the policies that are wrong for British industry.
The Chancellor believes that the economy is fundamentally sound. He believes that our prospects are better than ever. If he believes that we are doing well, can he say why, during the past nine years, manufacturing output, which has risen by 45 per cent. in Japan, by 25 per cent. in the United States, by 16 per cent. in Italy and by 12 per cent. in Germany, has in Britain only just come back to the 1979 level? Why has our share of manufacturing exports in world trade fallen? Why, as a test of future prospects, is manufacturing investment not much more than the level of 1979?

Mr. Phillip Oppenheim: rose—

Mr. Brown: If the Chancellor believes that we are wrong, that he is right, and that the economy is in balance, he should consider the regions. What sense does it make to have overheating, congestion, skills shortages, pressure on the green belt and escalating house prices in one part of the country and under-investment, under-use of resources, high and persistent unemployment, forced emigration and depopulation in another, which are the results of his policies? Why, even in this year of high growth, are exports growing more slowly than those of all our European competitors, with one exception? Why are our imports growing faster than all countries except Italy and Greece? The result is that we have a trade deficit higher than ever in our history.
The deficits are most worrying because they are not just in our traditional industries, but exist in new high technology industries. Deficits in electronics have grown to almost £1 billion, in computers to almost £1 billion. in plastics to nearly £750 million. We import 50 per cent. of our washing machines and fridges, 60 per cent. of new cars and 80 per cent. of videos and computers. The problem is not the old industries making way for the new, as the Chancellor would like us to believe, but the new industries at home making way for the new industries from abroad which are taking over our market.
The Chancellor tells us that the balance of payments problem does not matter, is neither here nor there, and is something that we should not worry about. However, before the right hon. Gentleman was Chancellor with


power over the lives of millions he was the editor of a magazine with sales of thousands. He was a humble editor waiting for the power to put his ideas into practice and writing regular articles about problems such as the balance of payments.
I shall tell the House what the Chancellor did not say in those articles. He did not say that the balance of payments problems were neither here nor there. He did not say, as he said in July, that the balance of payments problem was a problem of success. He did not say, as he or his colleagues said in January this year, that the problem was a result of freak figures. He did not say that it was a second-order matter, which I remember him saying to a Select Committee. He did not say that it was self-correcting.
The right hon. Gentleman said exactly the opposite. He said then that the balance of payments "was the overriding priority". He said:
the balance of payments must come first".
He said, not that it was a second-order matter, but that it must come first; not a problem neither here nor there, but the overriding priority. Perhaps he does not remember that as the editor, rather than as the Chancellor, he said of Budgets at the time:
Our verdict must be guided first and foremost by what the Budget has done to strengthen Britain's balance of payments.
He was happy to give that advice in the 1960s, but he was not prepared to accept it in the 1980s.

Mr. John Townend: Will the hon. Genleman give way?

Mr. Brown: No. I shall give way to the Chancellor.
No doubt the Chancellor will tell us that the problems of the 1980s are fundamentally different from those of the 1960s and 1970s, that the balance of payments deficit does not matter because there is a fiscal surplus and because it is a private sector rather than a public sector phenomenon, and because, as he said, it has done little damage to the economy. He asks us to believe that this is the first balance of payments deficit in history that does not matter. However, the issue is not whether the balance of payments deficit is a private sector or public sector phenomenon, but whether it will be financed and at what cost in interest rates.
The damage to the economy was already clear on 25 August, at 12.30 pm after the appalling July trade figures were announced at 11.30 am. Investors did not wait to ask whether there was a fiscal surplus and it was OK, or whether it was a private sector or public sector phenomenon in origin, but were fleeing the pound, pushing the pound down and forcing the Chancellor to bend the knee and push up interest rates. That is the damage done to the British economy and British industry.

Mr. Ian Gow: Will the hon. Gentleman give way?

Mr. Brown: No.
Was not the Chancellor nearer the truth about deficits when, in 1969, in similar circumstances, when there was a fiscal surplus, when there was no public sector phenomenon that he could point to as explaining the balance of payments problem, he counselled the then Chancellor:

There is no case whatsoever for taking the smallest risk with the balance of payments in the coming Budget.
The tragedy is that the teenage scribbler who was right in the 1960s has now become the Chancellor of the Exchequer who is wrong in the 1980s. What has changed is not the nature of the problem, but the scale of the problem, which is now unparalleled in our history. It has changed from a problem in millions to a problem in billions; a problem which the Chancellor will fail to tackle at his peril.
No Government have had the advantages available to this Government. No Government in our history have had the £120 billion that has come in revenues and returns from the North sea. No Government in our history have had £40 billion in asset sales and capital stocks, which they have used for current consumption. No Government have had the £18 billion attained by the vindictive decision to break the link between pensions and earnings. That is £180 billion available to this country that has never been available under any other Government, yet no Government have invested such a small share of our national income in our future.
The Government are investing as a share of our income less than comparable countries in Europe—less than Portugal and Spain and less, of course, than Taiwan and Japan—with the result that we are more poorly prepared for the economic challenges of 1992 and the later 1990s than all our major competitors. We are more poorly prepared in education, when more young people leave school early and have fewer qualifications and when less of our work force is well qualified. We are so badly prepared that there are fewer students at university and college in Britain than there are in South Korea. We are poorly prepared in research and development, in science and innovation and in investment in our work force, which is the key to higher productivity.
If the Chancellor doubts the investment failure and the training gap, skills gap and research gap with which we go into the 1990s, let him listen, not to me, but to the Secretary of State for Trade and Industry, who, a few months ago, said:
Private sector research and development is a smaller proportion of GDP and growing more slowly than in most major competitors.
The training and skills of our managers and other employees are low compared with our principal competitors.
The level of productivity remains on average about one third to one half less than our competitors.
That was from a Minister in a Government who tell us that they have presided over a supply side miracle.
If we had invested as much as West Germany in these past nine years we would have invested £100 billion more in our future, yet West Germany had no North sea oil. If we had invested as much as Japan in these past nine years we would have invested £300 billion more in our future, yet it was Britain that had oil and Britain that wasted that oil under this Government. If the Japanese had discovered oil, would they have used the windfall resources of oil to close down many of their major industries, such as the electronics industry? If the Germans had discovered oil, would they have used the windfall to close Volkswagen or Mercedes or run down industry in the Ruhr? Would they not have invested even more in their future so that they were better prepared for the challenges of the 1990s?
The Government, who believe that there is no such thing as society, have little regard for the future. This is a Government who, to make a few individuals richer, will


make all our communities poorer. This is the Government who would prefer to give cash to the top 1 per cent. to buy their way into private schools and private education, even into private roads, rather than to invest in proper schooling, proper health care and proper transport for our community.
Our case is not just that the quality of life is being eroded in so many of our communities up and down the country. It is not only that the Government have failed to prepare this country for the economic challenges of the future. It is that this Government's vision of the future is so narrow, so blinkered, so dogmatic that when it comes to choices, against which a Government must be judged, they will always put the needs of children second to those of their friends, those people to whom they gave top-rate tax cuts.
When these Ministers have left office one, two or three years from now, many of them taking up jobs in the City, they will be remembered, not as members of a party that presided over an economic miracle, but as members of a party that squandered our oil money, sold off our assets with no benefit to the nation, paid out top-rate tax cuts which made everyone else worse off, failed to prepare our economy for the future, and left a society ever more polluted, congested, unfair and divided. These are the mistaken policies of now discredited Ministers in a failing Government. The House should vote against those policies tonight.

The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
congratulates Her Majesty's Government on its economic policies which have led to unemployment falling faster than in any other major country, manufacturing output at record levels and investment rising rapidly; welcomes the Government's achievements in restoring the public finances to such strength that the national debt is being repaid, while at the same time income tax rates have been reduced and public spending on priority programmes has been increased; commends the Government's firm stand against inflation and the action it has taken to secure monetary conditions that will exert further downward pressure on inflation; and applauds the Government's supply side policies which have enabled British industry to be more profitable than at any time for nearly 20 years and have led to manufacturing productivity growing faster than in any other major country during the 1980s.
I am sure that the whole House will join me in regretting the temporary absence of the right hon. and learned Member for Monklands, East (Mr. Smith) and in wishing him a full and speedy recovery. [HON. MEMBERS: "Hear, hear."]
That apart, I welcome this debate. Remarkably, it is almost a year since the Labour party chose to debate the economy. During that time, it has had no fewer than 18 opportunities to do so, but for some reason has failed to take a single one. The speech of the hon. Member for Dunfermline, East (Mr. Brown) perhaps explains why. He is obsessed with what he calls "top-rate tax cuts". Is he not aware that the top 5 per cent. of income tax payers now pay a significantly higher proportion of the total tax yield than when Labour was in office? Is he not aware that the whole of the increase in income tax yield in real terms comes from the top 5 per cent. of taxpayers and that the remaining 95 per cent. are not paying any more in real terms? Is he not aware that the purpose of the cuts in the

higher rates is to improve incentives and motivation, as we have seen with the economy performing better? The Labour party, is not interested in the economy performing better. It is simply interested in malice.
As for pensions, I was astonished to hear—

Mr. Harry Ewing: On a point of order, Mr. Speaker. The Chancellor's speech is being freely distributed to members of the Press Gallery. Would it not be for the convenience of the House and the better management of the debate if the Chancellor remained seated and gave us all a copy of his speech, so that we could go on with something sensible?

Mr. Speaker: I am concerned only with whether the Chancellor is in order, and he is. Furthermore, he has been speaking for only two minutes.

Mr. Lawson: I was astonished at the impertinence of the hon. Member for Dunfermline, East in his comments on pensions. Is he not aware that, while this Government have been in office, pensioners' incomes have grown on average, by 2·5 per cent. a year in real terms, whereas under Labour there was scarcely any increase? The Labour Government robbed the pensioner by changing the system of uprating. They robbed the pensioner by having negative real interest rates. Above all, they robbed the pensioner through the ravages of inflation.
The hon. Member for Dunfermline, East talked a great deal, as he has in the past, about the real economy—I shall come to that—but I often wonder whether he is living in the real world. I well recall him predicting, two years ago almost to the day:
The Government simply cannot reduce unemployment by present economic policies.
Since then, unemployment has fallen in each and every month. Today the hon. Gentleman has been bemoaning the lack of investment in the economy—I think that that is what he said. Is he really so blind to what is happening up and down the country—the factories being extended and the new machines being installed? Total investment in the economy is running at all-time record levels, well above anything achieved under Labour, and is currently surging ahead twice as fast as the growth of consumption. That is what is happening to investment today. In the past five years, investment has risen faster than in any five-year period for a quarter of a century, and this year we are seeing a particularly strong investment boom, with manufacturing investment leading the way. That is the truth.
However, it is not merely a matter of quantity. Today's investment is high-quality investment. The days when businesses bought machines and equipment simply for tax reasons are over, thanks to the corporation tax reforms that I introduced in 1984. It is partly, though not wholly, as a result of that that the rate of return on capital in manufacturing industry is better today than it has been for nearly 20 years.
The hon. Member for Dunfermline, East appeared, however, to be particularly—if not exclusively—concerned with public sector investment. That is one of the blind spots of Labour Members. When they talk about investment, they mean exclusively public sector investment. If that is what they consider important, however, let us talk about it.

Mr. Andrew Welsh: Does the Chancellor agree that there are different kinds of investment and that


it is a dangerous form of investment when a foreign company can step in and take over the largest remaining native-based manufacturing company in Scotland—Scottish and Newcastle Breweries? Will the Government use section 13 of the Industry Act 1975 to prevent such a takeover and protect jobs in this country?

Mr. Lawson: The misbegotten Industry Act 1975 was never used by the Labour Government, let alone by the present Government. But let me continue. Let us consider the Labour Government's record on public investment when they were in office and had a chance to put their views into practice for the last time. Let us see what they did.
Under Labour, spending on roads fell by 40 per cent. in real terms. We have increased it by 30 per cent. in real terms. Not content with cutting nurses' pay by 20 per cent. in real terms, the Labour Government slashed capital spending on hospitals by nearly a third. We have increased hospital spending by more than 40 per cent., just as we have increased nurses' pay by more than 40 per cent. in real terms. That is the difference between this Government and the Labour Government. That is the difference between what Labour Members say at the Dispatch Box now and what the Labour Government actually did when in office.
The investment boom now taking place throughout the country is a sign of the new-found confidence of British business and British industry. That confidence has infected the entire British people—indeed, that is why they have been saving less and spending more.

Mr. John Garnett: Private sector investment is not an end in itself but a means to an end—the end being competitiveness. If the picture is as glowing as the Chancellor claims, why are we suffering such a colossal imbalance of imported manufactured goods?

Mr. Lawson: The sign of competitiveness is the size of our share of world trade in manufactured goods. For the first time in decades, under this Government we have maintained our share of exports and world trade in manufactured goods.

Mr. Bryan Gould: In relation to that claim, what credence does the Chancellor give—most people give considerable credence—to the Ernst and Whinney ITEM analysis which shows that our share of world trade in manufactures, at 6·9 per cent., is at its lowest ever and that we have been overtaken by the Italians and are in danger of being overtaken by countries such as Canada, Spain and the Benelux countries? Does the Chancellor believe those figures? If not, will he tell us what is wrong with them?

Mr. Lawson: Those figures were certainly faulty, and the official figures are correct. If the hon. Gentleman will write to me, I will explain to him in detail the methodological errors in the Ernst and Whinney figures.

Mr. Gordon Brown: Do tell us now!

Mr. Lawson: As I was saying, the investment boom now taking place is a sign of the new-found confidence of British business and industry. That confidence has infected the entire British people. Indeed, that is why they have

been saving less and spending more—so much so, in fact, that we are growing rather too fast. I do not expect Labour Members to know much about that, as it is a problem they never had to face—indeed it is just about the only economic problem that the Labour Government did not have to face.
However, it is absolutely clear that the problems that we now have would have been infinitely worse had I accepted even the smallest part of the advice that Labour Members gave me at the end of last year and for much of this year. The House will recall that, when the stock market crashed last October, the Labour party took it as a signal that the recession which it had been confidently predicting every year for the past six years was finally upon us.

Mr. Stuart Holland: We warned against the possibility.

Mr. Lawson: The hon. Gentleman was depicting in the most lurid colours the collapse of capitalism which he believed was coming to pass.

Mr. Holland: As the Chancellor will be aware, we said that if there was a cut in the United States budget deficit, the world economy would slow down. The fact that there has not been such a cut is one reason why we have not had a crisis on that scale.

Mr. Lawson: Even on that narrow point, there has been a slight cut in the American budget deficit, but the world economy has speeded up.
At that time—it is all on record—Labour Members were urging me to cut interest rates far more than I was prepared to do. On top of that, they called for expansionary fiscal measures to be taken. Unless we altered course, they claimed—to quote the motion that they tabled for the last Opposition day debate on the economy—there would be
serious implications … for investment and employment".—[Official Report, 5 November 1987; Vol. 121, c. 1084.]
I rejected their advice, and did not alter course. The House has already heard the results, especially for investment. Far from recession, the problem is that the economy as a whole, and domestic demand in particular, have been growing rather too fast, with inflation edging up and the current account of the balance of payments moving into substantial deficit.
With the Government's own finances in surplus, the current account deficit is not in itself a cause for alarm. In today's global markets, it is inevitable, and, indeed, desirable, that there should be net capital flows from one country to another, which may last for a period of years. Current account imbalances are the inevitable counterpart. British industry is thriving, investing for the future and drawing on the savings of the world to do so.
When the Labour Government were in power, with a large Budget deficit, raising money abroad to finance a current account deficit was always a nerve-racking and chancy business, because foreign investors understandably had no confidence whatever in the policies pursued by that Government. Today, the situation is very different. Today, foreigners want to invest in this country, and I intend to stick to the policies that give them that confidence.
What does need to be directly addressed, and has, indeed, been directly addressed, is the re-emergence of inflation. That is why interest rates have been raised, and raised substantially—and, as I have repeated on


innumerable occasions, they will have to remain as high as it takes for as long as it takes to get on top of inflation. That, in turn, will require MO to be heading firmly back towards the target range that I set at the time of the Budget.
I realise that higher interest rates are not popular with home owners or small businesses, but this Government have never shirked taking unpopular measures when it is necessary to do so—[HON. MEMBERS: "Especially after elections."]—and a sustained rise in inflation would be far more damaging than a period of higher interest rates. Let us also not forget that higher interest rates benefit savers—many of them pensioners, for whom the Labour party periodically professes concern, but whose savings were devastated by the nightmare of Labour's inflation.

Mr. Harry Ewing: I invite the Chancellor to go back one stage before interest rates were increased not once but nine times, and before inflation leapt up rather than crept up. Does he accept even the slightest possibility that it might have been his mistaken policies which caused the increase in inflation in the first place so that responsibility for the consequences must lie solely with him and his colleagues?

Mr. Lawson: As I implied earlier, and with the benefit of hindsight, whatever mistakes I may have made on that front would have been far worse had I taken the advice of the Opposition, who were constantly urging me to cut interest rates even further and to have a huge fiscal deficit.
As I have said on innumerable occasions during the past two years—but see no need to repeat in every single speech I ever make—the battle against inflation means that there can be no question of bailing out businesses that fail to curb their costs, and in particular their wage costs, by permitting the exchange rate to depreciate. That is Labour's policy—as we shall no doubt hear from the hon. Member for Dagenham (Mr. Gould) when he replies—and it is one that I wholly reject.
While on the subject of the exchange rate, I would just add this. For most of the past 12 months, whenever the pound has strengthened slightly, it has been said that it has become a one-way bet, set to soar out of sight; and whenever the pound has weakened slightly, it has been said that it is about to plunge disastrously. The prosaic truth is that, as it happens, throughout the past 12 months, with the exception of a short-lived upsurge in April and May, the sterling index has never varied by even as much as 3 per cent. from its present level.
However, one thing that I will not do is take lectures on inflation from the Opposition, who presided over more inflation in a single year than there has been in the whole of the past five years put together. The current rate of inflation is certainly too high and must be brought down, but it is well under half the average level recorded throughout Labour's disastrous spell in office.
What is more, the Opposition would do no better in the highly unlikely event that they were ever returned to office, for they are committed to higher public spending, a Budget deficit in place of a Budget surplus, lower interest rates and a lower pound. It is no wonder that the Labour party is the party of inflation—it always has been and it always will be.

Mr. Shersby: Does my right hon. Friend recall that in June 1975 the then Prime Minister, now Lord Wilson, circulated to every household in the country a leaflet telling every citizen that inflation was 26 per cent. higher

than it was a year before and that prices were 88 per cent. higher than they were in 1970? That is the standard of inflation under the Labour party.

Mr. Lawson: My hon. Friend is right to remind the House—and, indeed, the nation—of the horrors of inflation under a Labour Government.
Nor will anything change as a result of Labour's so-called policy review. I listened carefully to the hon. Member for Dunfermline, East but curiously, not once during the whole of his quite long speech—not too long, but quite long—did he say anything about the outcome of that review. Perhaps, on reflection, that is not so curious, because the Opposition can afford to take their time—they have such a long period of opposition ahead of them.
I have to say, in all candour, that the picture that the hon. Gentleman attempted to paint of the British economy today portrays a party that has become wholly out of touch with the everyday lives of the British people. I commend to him the friendly advice in the leading article in the brand new Left-wing newsletter "Samizdat", which said about economic performance:
To admit the improvements could seem like defeatism. To ignore or downplay them does not carry conviction.
That is sound advice. It continued:
Yet it is surely reasonable to welcome economic advance, even to allow the Government a part in bringing it about.
I commend that advice to Opposition Members.
The Opposition are always urging me to look at what they like to call the "real economy". I shall tell them just what is happening in the real economy, as they clearly do not know. Production is at an all-time high; national output has risen by 6 per cent. during the past 12 months; factories everywhere are humming; exports are at an all-time high; unemployment is tumbling; investment is at an all-time high and is roaring ahead. Great tracts of our country are being rejuvenated as old buildings come down and new ones go up. We have only to go five miles along the river to docklands to see that in action; or to the north-west at Salford Quays, where new life has been given to a once-depressed inner-city area; or to Glasgow where prospects are better now than for a very long time indeed —[Interruption.] There are many other areas, too—[Interruption.] Yes, including the north-east.
Leading the way in all that has been manufacturing industry, where output has risen by 7 per cent. during the past year to reach a new all-time high. Manufacturing industry's output actually fell under the last Labour Government, together with our share of world trade and practically everying else—apart, that is, from unemployment, which doubled during their period in office, and inflation, which rocketed. Britain's manufacturers have led the world in improving their efficiency in the 1980s. Industrial relations, quality and reliability have all improved beyond recognition. As a result, throughout the country new firms are setting up, and established firms are increasing their investment.
Overseas firms, too, see Britain as an increasingly attractive place in which to invest. Most recently, there has been the very welcome news that Ford is expanding its operations in Bridgend. That decision is a firm vote of confidence in the management—[Interruption.]

Mr. David Winnick: That is on page 14.

Mr. Speaker: Order. Hon. Members come to the House to listen to speeches, not to read them—[Interruption.]Order. Listen to the speech.

Mr. Lawson: Opposition Members are clearly not the slightest bit interested in whether Ford invests in Bridgend, but the people of Wales do care about that investment.
Ford's decision was a firm vote of confidence in the management and work force at Bridgend, following the damaging strike by the constituents of the hon. Member for Dagenham in February and the antics of Labour's true shadow spokesman on trade and industry, Mr. Ron Todd, which cost Scotland so many jobs in Dundee. Indeed, Dundee is a sad illustration of the conclusion reached by Professor Metcalf of the London School of Economics, who wrote in the New Statesman—not a journal noted for its uncritical support of the Government:
The plain fact is that in the 1980s, non-union companies have a better record on maintaining and creating jobs than do unionised companies.
[Interruption.]

Mr. Speaker: Order. Will the hon. Member for Walsall, North (Mr. Winnick) please put that paper away?

Mr. Alistair Darling: The Chancellor referred to the interest of foreign companies in this country. How does he square the remark made by Lord Goold, the chairman of the Scottish Conservative party, that Scottish and Newcastle Breweries should remain an independent Scottish company, with the Government's policy as enunciated in the mergers policy document, which clearly shows that the Government will let foreign predators strip our companies and do whatever else they like? How does he reconcile the two?

Mr. Lawson: Lord Goold is certainly entitled to his opinion, which may be widely shared, but that is no reason to be hostile to foreign investment. I think that the hon. Gentleman, on reflection, will realise that his question was a complete non sequitur.
Thanks, in part, to the emerging benefits of bringing trade unions back within the law, unemployment has fallen faster in Britain during the past two years than it has in any other major country.
Let me remind the House that at the last general election the Labour party said that if it was re-elected it would reduce unemployment by 1 million over a period of two years. The Labour party said that it would do that by an extra £6 billion a year of public expenditure—although, as usual, the Opposition were remarkably coy about how that public expenditure would be paid for. Let me tell Opposition Members this. In the year and a quarter since the general election—at which Labour's policies on unemployment and, indeed, everything else, were so comprehensively rejected by the British people—unemployment has fallen by more than 650,000. That rate is equivalent to a shade over a million in two years.
How has that been achieved? It has not been achieved by spending an extra £6 billion, for a start. That did no good when the Labour party was in power and it would not do any good now.

Mr. Winnick: Page 17.

Mr. Speaker: Order. It is very unseemly of the hon. Member for Walsall, North (Mr. Winnick) to behave in

this way. We come here to listen to each other's speeches not to read from documents which are not parliamentary papers.

Mr. Graham Riddick: Did not a former Prime Minister, Harold Wilson, describe the hon. Member for Walsall, North (Mr. Winnick) as the silliest man in the House of Commons?

Mr. Speaker: Order. Let us get on with the debate in a parliamentary fashion.

Mr. Lawson: We have more jobs today because we have profitable businesses and a thriving economy. [HON. MEMBERS: "Oh."] Yes, we have more jobs than ever before in our history.
In particular, we have more jobs because we have more businesses. That is something else that did not happen when Labour was in office, which is hardly surprising, as Labour sought to regulate everything in sight and to tax enterprise out of existence. Today, with a tax regime that makes it worth working hard and taking risks, the small business sector is booming. I take the point made from a sedentary position from the Labour Front Bench. So far this year, after netting off the businesses that have died, the net increase in new businesses is running at the rate of more than 1,000 a week. That is the net figure, which means that new businesses are being created faster today than at any time in our history.
Meanwhile, the measures I have taken to get on top of inflation will inevitably involve some slowdown in the economy, after two years in which growth has been faster than the already very strong trend. But this needs to be seen in perspective. Over the past five years, growth has averaged well over 3 per cent., and over the past two years it has risen to over 4 per cent. There is no reason why the slowdown need take us as low as the 2 per cent. average growth of Labour's five years. In other words, a performance below the trend of recent years will still be well ahead of the state of affairs that applied under the Labour party.
Industry itself remains in good heart. To quote today's "Quarterly Trends Survey" from the CBI:
Both investment intentions and the level of business confidence remain strong in manufacturing.
And well they might. British industry is better managed, better equipped—and with a better work force—than it has been for a generation or more, so it is better able to sustain a higher level of performance.
The British economy has been transformed, these past nine years, by this Government's commitment to sound finance and to free markets.
That is not just my assessment. I have to thank the right hon. and learned Member for Monklands, East, in his absence, for this piece of advice, which he gave the House on 14 January:
I advise Conservative Members that it is extremely instructive to read OECD publications to discover what it says about the British economy."—[Official Report, 14 January 1988; vol. 125, c. 484.]
I duly turned to the latest OECD report on the British economy, published less than three months ago, and read this:
It is already now clear that the 1980s will stand out as a decade of impressive improvement in economic performance, reversing a long-term trend of decline relative to other Member Countries.
I quite agree with the right hon. and learned Gentleman: that is, indeed, extremely instructive.

Mr. Rhodri Morgan: Will the Chancellor give way?

Mr. Lawson: For the last time.

Mr. Morgan: Will the Chancellor confirm that it is normal practice for an OECD document to be produced in draft and submitted to the Government whose economic policies it describes, and for amendments by that Government to be taken into account in the final version?

Mr. Lawson: The document was written by the OECD, and I am sure that the OECD would be deeply upset to hear the hon. Gentleman suggest anything other than that. I assure the hon. Gentleman that if he examined not the OECD report for 1988 but that for 1978 he would find that it told a very different story.
Fortunately, even though the Labour party does not really understand what is going on, the British people do. They also understand why. As Mr. Eric Hammond said, explaining why the electricians were leaving the TUC:
Above all, our members reveal an enthusiasm for the market system and its values which infuriates the sherry-party revolutionaries with their model resolutions and conference hall rhetoric.
What is more, enthusiasm for the market economy is spreading all over the world—far beyond the members of Mr. Hammond's union. It has even been embraced by Mr. Gorbachev in Russia. Even the Chinese are taking tentative steps along that road. In fact, today, devotion to Socialist economics is to be found only in Cuba, Albania, and Walworth road.
That is why Labour's policy review is not even a shambles, but a complete sham. It is clear that Labour will end up sticking to the same old policies. Labour has already said that taxes should go up. It is already committed to taking privatised industries back into state control. Opposition Members are already clocking up new public spending pledges which would take them straight back to the IMF, as they did in the 1970s. They are completely out of touch with the world in which ordinary people, and real people, live. They may think that they have a dream ticket; in fact they are living in a dream world.
Their economic policy and the attitudes which shape it are completely divorced from modern reality. That is why they will be voted down not just in this House tonight, but in the country as whole.

Mr. A. J. Beith: The main charge against the Chancellor today is not a charge against his new habits of speech writing and delivery, although he has certainly given a new meaning to the phrase, "refreshing himself copiously from notes", given that those notes had been supplied to the press in advance. One begins to wonder when we shall have two little glass autocue screens in front of the Dispatch Box so that a speech can be delivered with more care.
Of course, there was a reason for the Chancellor ensuring that the press had his comments in advance: his speech last Thursday at the Mansion House dinner did not entirely meet expectations. The absence from it of certain phrases caused quite a stir. It is one thing for the Chancellor—like many other hon. Members—to feel slight indigestion when delivering a speech at a dinner, but that indigestion was felt widely around the City and the financial community, where there has been the clear

expectation that something will be said in today's speech to calm the markets and give a sense of reassurance. Presumably that is why the speech was supplied to the press in advance of its delivery.
I am not sure whether the City will find the reassurance that it seeks. Meanwhile, the House seeks more long-term assurances than the markets may be looking for today We want to know what state the British economy will be in if the Chancellor continues on present lines.
The Chancellor faces a number of immediate problems. He has referred to one of the greatest of them as inflation—an inflation that he has helped to generate by his own policies. He has done so through his interest rate policies as well as by the way the Government have increased electricity prices, prescription charges and so on.
Another problem which the Opposition parties have stated as clearly as that of inflation is the balance of payments. The Chancellor claims to have privatised it. He claims that it is not really a problem any more. Indeed, the Chancellor thinks that he has privatised Keynesianism. He thinks that demand correction can be carried out by the private sector. He cannot get away with that. Eventually, the continuing balance of payments and balance of trade problems will prove to be real problems in the real economy. The idea that they are made easier to finance because they exist in the private sector sits strangely with the fact that any reputable Government can borrow more cheaply than the private sector can. The Chancellor's case does not stand up to argument.
The Chancellor's Budget strategy contributed largely to those problems. The tax cuts did not merely feed through as more money in the pockets of people who were then able to go out and spend it, but created an expectation of spending power which was acted upon immediately. We all know that the rise in consumer demand did not wait for the tax cuts to arrive in the pay packet. There is no doubt that those tax cuts helped to stimulate that rise in consumer demand.
Two remedies are being attempted at the moment—the interest rate measures and the public expenditure policy, about which we shall learn more shortly. The Chancellor has admitted that interest rates are a limited and, perhaps, blunt instrument. I am not using his own phrases, but he was quick to point out in his Mansion House speech that it was rather foolish to blame two weeks of lower interest rates for a whole series of problems. Interest rates are not a sophisticated instrument for restraining consumer demand, as any executive of a credit card company must realise when he collects the proceeds of the enormously high interest rates for credit card borrowing.

Mr. Edward Leigh: The hon. Gentleman may recall that at the last election the alliance parties proposed an increase in public sector borrowing to finance an increase in public spending. What does he think the effect of that policy would be on boosting interest rates? Or does the hon. Gentleman propose to rat on his policies of the last election as comprehensively as he has ratted on his former identity?

Mr. Beith: I must say that the hon. Gentleman levels a very strange charge at me. If he has not noticed, a little time has passed since the last election, but we advocated, in the circumstances of that time, that it would be possible to make a considerable expansion in selected public expenditure to reduce unemployment, as long as measures


to restrain inflation were taken at the same time. We showed our willingness to take measures to restrain inflation.
The Chancellor and others said that such measures were highly undesirable and would not be necessary. The Chancellor has now discovered that there must be some means of restraining inflation. Like him, I am not a wild enthusiast for the rather cumbersome apparatus that previous Labour and Conservative Governments have sought as a means of restraining inflation. If inflation continues, measures must be taken, but it is wiser not to generate additional inflation by measures which affect important consumer prices and cause the problem that the Government now have.

Mr. John Townend: rose

Mr. Beith: I shall give way when I have made a little progress with my speech.
At the same time, we have every reason to believe that a fairly tight policy on public expenditure will be conducted by a Government who have declared that their policy is that public expenditure should diminish as a proportion of GDP year on year. Nobody has ever said when that policy is supposed to come to an end. Perhaps one day the Chief Secretary will tell us at what point the steady year-on-year diminution of public expenditure as a proportion of GDP is supposed to end. It has been held out as the objective of the Government for no particular reason.
In given circumstances, too high public expenditure can obviously be dangerous, but there is no particular merit in reducing public expenditure steadily year by year, least of all in circumstances where there are compelling reasons to see some of the benefits of increased prosperity go into public investment—some into public services and some into areas that will promote industrial competitiveness. One of the consequences of the Government's attitude to public expenditure has been squalor in parts of the public services—the National Health Service is the most obvious and most often quoted example—and a continuing weakness in areas which are of importance to industrial competitiveness, of which training is an obvious example. All the surveys show far higher levels of qualifications, training, higher education, and craft skills in our main industrial competitors than in Britain. The Government should make a far bigger effort in that direction.
Another consequence of the Government's attitude to public expenditure is likely to be the squeeze on child benefit, which has already been discussed, and is likely to lead to further problems for some of the poorest people. The freezing of child benefit is an odd interpretation of the Government's manifesto pledge. They certainly made no effort at the time to show that that was the appropriate interpretation.
I stressed to the Prime Minister today, and I stress again to Treasury Ministers, that they believe in incentives. Child benefit is one of the few means of getting help to poor families which does not at the same time sharpen the teeth of the poverty trap, which is what a switch to means-tested benefits is likely to achieve. I do not believe that the Government have undertaken the kind of review that would enable them to devise an alternative to child benefit which does not sharpen the teeth of the poverty

trap and lead to a situation where those at, and just above, current benefit levels find that for every pound that they earn they lose substantially by the loss of whatever the alternative is for child benefit.
That illustrates a number of long-term problems that will remain if the Government do not pursue more sensible policies. They should equip industry through more expenditure on research and development and a more skilled work force, thus providing an adequate infrastructure. It requires some care, but selected private investment could be less inflationary and generate fewer imports than the current boom in private sector consumption.
The Government are exacerbating other long-term problems by not tackling them. The housing crisis requires attention, both to the overall financial system under which housing is supported and to what is happening to public sector and other kinds of rented housing. The Chancellor made one nod in the direction of reducing some of the subsidies at the top end of the housing market in his action on multiple mortgages, but—at the Prime Minister's insistence—he left untouched tax relief on mortgage interest at the top rate of tax. Nobody who has studied this sector can seen any sense in that. I do not believe that the Chancellor can either. This is another thing that has continued to fuel the rapid rise in house prices.
A wider problem lies in the rented sector. Rented housing is so difficult to obtain and so expensive in many parts of the country that it is a serious bar to labour mobility. When industry attempts to improve its competitiveness, it constantly comes up against that difficulty. It finds attracting skilled workers from other areas extremely difficult when those workers cannot obtain housing. Part of the answer to that problem is to encourage more widely spread development, rather than concentrating it in the south-east. There must be some opportunity for people to move around the country to obtain jobs, especially those who wish to do so, but present housing finance does not allow that.
Another long-term problem is that the Government are not creating a climate for real business growth. A large proportion of the development and growth now taking place is dependent on the inflation of property values. One can see that vividly illustrated by the Royal Ordnance factory saga. The short-term growth potential lies in the opportunity to sell land that has acquired considerable value because of planning permission.
That paints a rosy picture for a number of companies, but it does not provide a climate for stable long-term growth. A number of other elements are necessary for industry to have a stable environment. As the Chancellor has said, one of those elements is exchange rate stability. If that is so, why do we continue to refuse to put Britain into the exchange rate mechanism of the European monetary system? It is because that is one of the things that the Prime Minister cannot personally bear to contemplate.
In the Chancellor's Mansion House speech there was a phrase which I took to be yet another coded reference to his desire to get Britain into the EMS. When talking about European economic co-operation, he said:
I would like to see that co-operation taken further.
We continue to have a Government who are divided on economic policy in relation to Europe. In fact, they are even more divided on European policy than we had reaised earlier. Before the Prime Minister's Bruges speech, most people assumed that there was a broader consensus about Britain working with Europe on the development of an


economic policy than there now appears to be. I was never more surprised than to find in the Division Lobby last night such a large number of Conservative Members apparently supporting the Single European Act—with varying degrees of enthusiasm in the wake of the change of climate in which the Prime Minister seems to have induced in her party on that issue.
The Chancellor had the opportunity to go down in history as the Chancellor who presided over years of clear improvement in Britain's economic performance. Advantage could have been taken of that improvement as well as capitalising on special advantages, such as our oil revenues, to build for the future. I regret to say that the right hon. Gentleman's years as Chancellor will not be looked upon in that light. The OECD report that the right hon. Gentleman quoted gives too rosy a picture. When we look back upon the right hon. Gentleman's Chancellorship, it will be clear that some changes have led to greater productivity and greater competitiveness, but that the opportunity was lost to create the conditions for an enterprise society in which success was widely shared.
We have sought to add to the Labour party motion, which is sensible so far as it goes, a clear reference in our amendment to the need for an enterprise society and the need to work together in Europe to develop common economic policies and common economic institutions. Such co-operation would enable us to prosper.
I must congratulate the hon. Member for Dunfermline, East (Mr. Brown) who had to step into the unfortunate breach left by the right hon. and learned Member for Monklands, East (Mr. Smith), to whom we all wish a speedy recovery. The speech of the hon. Member for Dunfermline, East was strong on denunciation. I should hate to come across the hon. Gentleman in an angry mood in some kirk session ravaging against the evils of our society, but unless all parties commit themselves to international remedies and greater European cooperation, we shall not see the achievements which the Labour party's motion seeks.
There are many things that we need to do if our industry is to be properly equipped to take advantage of new European developments. Unless we have direct rail links from the north of England and Scotland, through the Channel tunnel and into Europe, industry in those regions will be unable to share in the potential greater prosperity. If we learn later this week that Sunderland Shipbuilders is to close, there will be no basis for that industry's future. One or two companies may remain, but we shall lose the opportunity to share in future growth.
The Chancellor had considerable advantages over many of his predecessors. In his Mansion House speech the right hon. Gentleman chose to quote some of his past remarks when he was a teenage scribbler. That career need not have stood in the way of a successful chancellorship. The Chancellor now finds himself under attack from many directions, not least from within his own party. At the end of the day, I believe that the verdict on him will be that he has missed the opportunities—opportunities that the Government should have recognised—to build for a more sustainable future.

Mr. Dudley Fishburn: When making one's maiden speech I believe that it is the convention to make some remarks about one's constituency. That is hardly

necessary when I look around the House and see the many hon. Members who came to visit that constituency in July in search of the elusive Kensington voter.
Kensington is the great cosmopolitan heartland of the capital. South Kensington is an area of great prosperity and architectural heritage. Some 70 per cent. of the homes in that area were built before the first world war. The two great concerns of that area are conservation of the environment and the interests of those people who live in mansion blocks under archaic leaseholding arrangements and who have missed out on the great housing reforms of the past few years.
North Kensington is home to two great ethnic minorities. There is a Moroccan population of 7,000 and a West Indian population. although that population is now almost wholly British, which is particularly welcome. Although 30 per cent. of the residents of my constituency were born overseas, as I was, that is no bar to their being utterly British.
The economic expansion that has taken place under this Government in the past few years has given the black community of North Kensington the interest that they have sought for so long—to become part of a productive economy, to find jobs without prejudice, to receive a productive share of the new wealth of the country and to have fair policing of their community. The black community looks somewhat askance at the black leaders, who are like the trade union leaders of a decade ago, when they march off full of the sound of fury in one direction leaving the troops behind.
I count myself as extraordinarily fortunate in having a truly brilliant parliamentarian as my predecessor. Sir Brandon Rhys Williams was a great parliamentarian and campaigner. He knew that if it took Mr. William Wilberforce 25 years to convince this House that the abolition of slavery was a good idea, those who have more modest aims must still think in terms of decades to achieve them. Sir Brandon made his maiden speech 20 years ago. He argued for something that was regarded as positively quirky: that people should have the right to portable, private, personal pensions. Twenty years later, under this Government and this Chancellor, such pensions were finally created.
I feel that Sir Brandon should be the patron saint of all Back Benchers. He was a great campaigner and one of his Bills to put more non-executive directors on the boards of companies to protect the interests of small shareholders was passed by the House earlier this year. It was killed in another place, however, on the very day that Brandon died. I am delighted that that Bill will be reintroduced in the new Session by my hon. Friend the Member for Beaconsfield (Mr. Smith). I hope that the Bill will have the full support of the House, as it had in Brandon's day.
I wonder how good a patron saint Brandon would be. Instead of looking down benignly on our proceedings, I believe that he would always be too busy collaring some angel and discussing his latest plan for child benefit for cherubs. I know that Brandon is enormously missed. Whatever the time I may spend in this House, if I can leave it with but a fraction of the affection in which Brandon was held in his constituency and the esteem in which he was held in this House, I shall count myself a lucky man indeed.
I came to this House—much to my surprise and greatly to the surprise of the residents of my constituency—having been, for the previous 20 years, once a teenage and then a


decidedly middle-aged scribbler. In those days, in common with many who are participating in this debate, I concentrated on the various economic indicators that show up on the control-panel of the economy. By doing so, however, I often lost touch with the fact that the engine of the economy, which creates the real productive increase in our national wealth, has been purring along for the past six years at almost unprecedented speed. We scribblers enjoy pointing out that some particular measure of inflation or some particular measure of the trade deficit is going wrong. We have done that so much, however, that we have overlooked the extraordinary growth in personal productivity and prosperity that has occurred.
Of course it is possible to become excessively hooked on the details of economic matters. One should remember that it is possible to have a high rate of inflation and of growth at the same time. The Government, quite rightly, will not allow that to happen, because it is not economically ideal, but it is possible—witness Brazil. It is possible to have a major deficit in public spending, and strong growth—witness Italy. The Government have rightly put their deficit into surplus. It is possible to have a long and sustained trade deficit and still achieve real economic growth—the Chancellor may find that uncomfortable at the moment—witness the United States. I should remind the House that it is entirely possible to have all those things together—inflation, a public deficit and a trade deficit—and to have no growth in the economy—witness the years when the Labour party was in power in the last years of the 1970s.
Growth and a real increase in prosperity per head is economic reality. All other things are but measures towards that. I often feel that when people talk about the economy overheating they are extraordinarily unambitious in the aims that they hold for our economy in the years ahead. The growth course that this Government have followed in the past six years is only the start of a most modest beginning in real growth. It would take this country over 50 years to reach the same wealth per head that Germany has, if both countries continued at the same growth rate; and over 30 years to reach the same wealth as our neighbour, France. Let us not, in fear of overheating, turn back on our course of real economic growth: because that is the real measure of our success.
In the policies that we hear advocated by Opposition Members, the only thing that we can be sure of succeeding is that should our economy so overheat that it breaks into spontaneous combustion, a quick spell of a Labour Government would be the fire extinguisher to put out all growth for many years to come.
Future growth will come only with vastly increased productivity, and if we open up our labour market to the many people who are desperate to get into it. I do not mean only those who are unemployed but those many millions of people who would like to be employed, if we were able to offer them training and the opportunity to enter a productive job.
No single thing prevents that happening more than the collective bargaining that still sets, on one day a year, the wage rates of 100 per cent. of the people who are within its system for the rest of that year. We shall see the system of collective bargaining, for which there was once so fine a

historical need, wither on the vine over the next generation. It is a system of great social injustice and cruelty.
One third of people in the labour market at the moment do not come under the system of collective bargaining. They are men and women who sit down with their employers—they may be self-employed—to work out within budgets and their own responsibilities what their remuneration will be; what is expected of them; what their hours of work will be; and what are their productive intentions for the year. That is predominantly a middle-class luxury. The Government have been slow to spread it throughout the community. Whereas at the moment one third of people can fix their own remuneration to their own responsibilities and productivity and two thirds are left out, I predict that within a generation two thirds of employees will be deciding their own remuneration with one third having it forced upon them once a year through collective bargaining.
However, that can happen only if the Government will take a lead. As the largest employer and as the employer of all state servants—civil, military, the police and others—they permit that system of single collective bargaining to exist and therefore to hinder the entry into productive work of so many people who wish to work. A mother with children, for example, may want to become involved in work, but, under the system of collective bargaining, she is either "in" or "out" of work and cannot be on the margin. There are people coming up to retirement who still wish to continue in some form of productive labour and who, under collective bargaining, are either "in" or "out" and are, therefore, invariably "out". As I have said, we shall come to see that system as being, above all, socially regressive and cruel.
It is hard to say where the years ahead will lead in terms of economic growth. We know that, 100 years ago, the employment statistics in this country and in Europe were remarkable in that 30 per cent. of people were in domestic service, 20 per cent. in farming and 10 per cent. were employed in some form of horse transport. If we were to say to our grandfathers that all three of those great industries and sources of employment would disappear, our grandfathers would find it impossible to imagine the prosperity that we have in Britain today. Domestic service, which employed 30 per cent. of the working population, has disappeared; yet the grandchild of one who had been in domestic service now serves as the First Lord of the Treasury. Our farmers are almost an endangered species —they are so few and far between—but they pile up their surpluses to the sky in Britain and in Europe despite enormous increases in the world population. As the great-grandson of someone who was an illiterate journeyman-saddler in the horse trade, at least, in politics, I can say that I will be dealing with a superior form of horse manure.

Mr. Giles Radice: We all remember the predecessor of the hon. Member for Kensington (Mr. Fishburn), Sir Brandon Rhys Williams, who won the respect and affection of the whole House by his independence and integrity. I for one remember especially what he had to say about child benefit. Judging by the speech that we have just heard, the knowledge which the hon. Gentleman has shown about his constituency and his


grasp of economic issues, he will be a worthy successor to Sir Brandon, at least for this Parliament. We look forward to his contributions to our economic debates.
The Chancellor invited the Opposition to say what is going well in the economy. I want to do just that. I shall deal first with economic growth. It is certainly true that, since the deep and disastrous recession of 1980–81, the British economy has expanded steadily throughout the 1980s. Average growth in the period 1979–87 compares favourably with that of 1973–79, although the Chancellor should note that it is still significantly below that of 1968–73, when he was a complaining teenage scribbler.
The second encouraging feature has been the increase in labour productivity. During the 1980s, labour productivity has risen faster than it did in the 1970s. In part. that improved relative performance has reflected the sluggish productivity growth rate in other major industrial economies. Interestingly, a similar productivity performance in the British economy between 1968 and 1973 put Britain second bottom of the six major industrial countries in that period. Therefore, we need to put what has happened in the 1980s into some perspective.
We should not forget that our improved productivity has coincided with sharper increases in unemployment in Britain than in other comparable countries. The latest OECD report, to which the Chancellor referred, also pointed out that those improvements in labour productivity have been related more to changes in work organisation than to increases in investment, and are therefore likely to taper off. Even so, there is little doubt that the increase in labour productivity has had the effect of raising the productive potential of the British economy.
Whereas it used to be said that we could grow at only two thirds of the rate of our competitors, we can probably now grow at the same rate without running into balance of payments difficulties. The Chancellor, with all the modesty that we have come to know and love, claims all the credit for those two successes. He also suggests that the improvement in the British economy can be sustained on present policies into the 1990s.
I congratulate the Chancellor on the way in which he has changed from an orthodox monetarist into something far more pragmatic. Some of us remember those far-off days of 1980–81 when the Government, especially the Chancellor in his guise of Financial Secretary, believed that they had found the magic ingredient: that the key to economic success was control of the money supply. As everyone now knows, it proved impossible to arrive at a satisfactory definition of the money supply. Should it be M3, M1 or even M0? No one could decide, and no one knows even today.
The other problem was that increases in the money supply appeared in practice to have little direct influence on inflation. As the Chancellor, with his much admired insouciance, told the Lombard Association,
no economic relationship is perfect".
By the end of 1985, the Government had tacitly abandoned monetarism.
One of the main reasons for the recovery of the British economy in the mid-1980s was the Government's adoption of a much more flexible policy. With the assistance of North sea oil and the proceeds of privatisation, fiscal policies were gradually relaxed and public spending increased—so much so that in the 18-month run-up to the last general election, the Chancellor helped to engineer an old-style pre-election Macmillan boom fuelled by

devaluation, tax cuts, earnings rising faster than inflation and a dramatic fall in the savings ratio, at the same time as a massive credit expansion.
By spring this year, the question being asked by serious commentators in the City and elsewhere was: could growth at this pace be sustained'? Last March, there were already clear signs that the British economy was growing not only faster than those of our competitors—we have heard the Chancellor boast about that this afternoon—but faster than our productive potential. The Chancellor, indeed, admitted that when he came before the Treasury Select Committee. The balance of payments was already in deficit and most commentators expected the position to deteriorate sharply.
That is why many of us, not only Opposition Members, warned the Chancellor against the tax cuts that he made in his Budget. I certainly did so myself, and I remember our Front Bench spokesmen doing so as well. We said that the cuts would contribute to the overheating of the economy and would make the balance of payments worse. The Chancellor cannot say that he was not warned, that this is something that we have just dreamed up.

Mr. John Tonnend: rose—

Mr. Radice: The Chancellor foolishly ignored our advice. He not only cut the basic rate of taxation but cut the top rate to 40 per cent. Since the Budget, the balance of payments has deteriorated alarmingly. Even the Chancellor now admits that the deficit this year will exceed £12 billion, and that it will be at least 1990 before there is any change in the balance of payments. Surely that must worry Conservative Members. The Chancellor also accepts that inflation will go up and will take some time to come down, but he is not proposing to do much about it as far as I can see.
It is clear that, because of what the Chancellor did in his last Budget, the British economy is now in danger of becoming seriously out of balance; so much so that the two successes that I have described—growth and the increases in labour productivity of the past few years—are now in jeopardy. In that context, it is instructive to compare British and Japanese economic policies in the period 1986–88.
British expansion has been based overwhelmingly on private consumption, boosted by a fall in the savings ratio to a 30-year low and a major expansion of credit on top of that. In both the 1987 and the 1988 Budgets, the Chancellor fuelled that consumption boom by tax cuts which, not surprisingly, served to worsen an already deteriorating balance of payments.
In Japan, the Government's approach has been far more balanced and far more successful. The expansion of Japan's economy has been based not just on private consumption but also on investment—investment in housing, manufacturing and the service sector. It is true that the 1987 Japanese budget made tax cuts, but as the latest OECD report—which came out on the same day as the report on the British economy—showed, the emphasis has been far more on increases in public investment and public works. The case for public investment—which the Chancellor so despises as an engine of growth—is not advocated only by Socialists. It is also actively supported by right-of-centre Governments in other countries.

Mr. Oppenheim: I have found it interesting today that so many Opposition spokesmen seem all of a sudden to


have discovered the Japanese economy and are lauding it to the heavens. Is it not true that the Japanese have very low public spending compared with most European countries; that they have very low tax and very low public indebtedness; and that for more than 40 years they have had the benefit of a Government who have pursued right-of-centre economic policies, which have encouraged enterprise and business and discouraged trade union malpractices? Perhaps that is one of the many reasons why Japan's economy has been so successful.

Mr. Radice: Of course Japan has a right-of-centre Government, but they are not an ideological Government. If they think it sensible to adopt a balanced approach to expanding the economy, they do not just cut taxes; they do not consider that the be-all and end-all of economic policy. They also rightly invest in the public sector and public works, because they recognise that there is much to be done in that regard, just as there is in this country. They are behaving in a far more sensible and pragmatic way than our Government.
The question remains: where do the Government go from here, with such a massive balance of payments deficit? The Chancellor gives the impression that the deficit is a minor local difficulty that can be financed indefinitely, but sadly that is not the case. It may be sensible to sustain for a short period a balance of payments deficit that is caused by temporary cyclical factors. But when it is clear, as it is in our economy, that demand is running well ahead of productive potential—and that in any case, as was shown by the OECD report, imports of manufactured goods have increased faster than exports throughout the 1980s and import penetration is on the increase—the problem must be far more serious.
It is not possible to continue indefinitely to support an external deficit that reflects both excess demand and underlying structural weaknesses, as ours does. Apart from anything else, the overseas assets about which the Chancellor boasts so often will eventually be used up, and that is a great waste of North Sea oil. Corrective action must be taken sooner rather than later.
The trouble with the Chancellor's strategy is that it is both too complacent and operating with far too few instruments. As the Chancellor tacitly admits, interest rates are now used primarily to control movements in the exchange rates, not to control movements of inflation. It is far too blunt an instrument in its impact on industry and far too uncertain in its impact on inflation and demand.
In the near future the Chancellor should be prepared to take action on two fronts. First, he should consider introducing consumer credit controls, at least temporarily. There is a case both for obliging lending institutions to make special deposits and for imposing some limitations on bank loans to the personal sector. At least that would be a signal to consumers and the market that the Chancellor was serious about overheating and the balance of payments deficit.
Secondly, the Chancellor should have the courage to admit that he was wrong in his Budget. One obvious move is to restore the 60 per cent. top rate band. It may well be that he has to go further—I do not know, and I hope not—if he is to restrain demand sufficiently to bring our balance of payments into equilibrium.
As my hon. Friend rightly said, the balance of payments does matter. My goodness, if we had been in government and the Conservatives in opposition, they would have been telling us how much the balance of payments matters. I remember how, throughout the 1960s and 1970s, Conservative Members used to do that. The balance of payments matters simply because it represents the fundamental test of our ability to pay our way in the world. If we cannot do that year in, year out, there must be something wrong with our economy. That is the truth.
It is better to act now when the problem is still surmountable than to wait until later when turning round the balance of payments could bring the whole economy to a grinding halt.

Mr. Timothy Raison: It is a great pleasure to be the first Conservative Member to congratulate my hon. Friend the Member for Kensington (Mr. Fishburn) on his maiden speech. We were all deeply impressed that he could speak with such sang froid and without a note in his hand, and that he seemed to get into the parliamentary habit with no apparent effort, although I am sure that the effort was there. He made a first-class debating speech, which one might have expected from somebody who had been in the House for many years, and he has got off to a most auspicious start.
All of us were particularly touched by the way in which my hon. Friend referred to his predecessor Sir Brandon Rhys Williams. He sang his praises as well as I could. I worked with Sir Brandon on many causes, and it is particularly relevant to mention him today because child benefit was a subject near to his heart. It is also the part of the Opposition's motion on which I wish to address the House.
What the Opposition have to say on child benefit is unimpressive. The motion seems to imply that incompetence in the management of the economy is responsible for the Government's reported decision to freeze child benefit, and obviously that is a ridiculous assumption. If the decision has been made, I hope that it will be changed in the next few days. My right hon. Friend the Prime Minister was careful to say that no announcement had been made, and my right hon. Friend the Chancellor of the Exchequer did not mention the subject during his speech.
I would not be surprised if the Cabinet were to consider the matter on Thursday morning. Therefore, I make a strong plea to my right hon. Friend the Chancellor of the Duchy of Lancaster and Minister of Trade and Industry that there should be no question of freezing child benefit. I know that he has a deep knowledge of this subject and I shall not try to embarrass him by digging up quotations from the past. I am sure that I could have found some that might have made him blush if I had read them today. He is evidently a reasonable man, and although he will address the House tonight as the Minister of Trade and Industry, he cannot altogether shrug off his past.
It is essential to say that there is clearly no difficulty in finding the £130 million that would be necessary to uprate child benefit next year. It is also important to say that those of us who are asking for the uprating of child benefit are not asking for expenditure above what was previously planned. It is different, for example, from the position over nurses' pay, because in that case the DHSS had to go to the Treasury and ask for more money. The public expenditure


White Paper shows that child benefit was expected to increase in the coming financial year in line with what was then assumed would be the rate of inflation, so we are not asking for additional money; simply that the Government should stick to the position that they adopted in previous years. Clearly, we can afford to uprate child benefit without harming the economy.

Mr. Ralph Howell: Is my right hon. Friend aware of the resentment that many people on low pay and pensioners feel when they are taxed on incomes well below £5,000 a year in order to give money to the richest people? Surely that cannot be justified.

Mr. Raison: I accept that some people, especially pensioners, express that view. I shall try to put to my hon. Friend and others why I believe that, despite that, it is right to pursue a policy of child benefit. I shall return to its merits shortly.
We should debate, not whether we can afford the £130 million, but whether child benefit is desirable and should be a major part of our social strategy. It would be completely wrong to change the system of child benefit in an ad hoc way. If the Government want to get away from child benefit as we have known it, that is one thing—I would not agree with that—but at least that should be done as part of a coherent policy, properly expresed, with alternatives set out, rather than by allowing it to wither on the vine.
The House knows the pledge in the 1987 Conservative party manifesto that child benefit would continue to be paid as now direct to the mother. That has been repeated often by the Prime Minister. Child benefit should be uprated every year and I have voted to that effect. It may be defensible occasionally not to uprate child benefit—for example, economic circumstances might make it imprudent— but it is unacceptable two years running when the economy, in terms of funds available to the Chancellor of the Exchequer, is strong and there is not a pressing need elsewhere not to uprate child benefit. That seems to mark a change of policy and a serious backtracking from the spirit of the manifesto. Therefore, I hope that my right hon. Friend will inform his colleagues that many Conservatives, though not all, believe that it would be wrong to embark on this change.
I am sure that Ministers have been trying to find another way of tackling this problem. In particular, they will have considered whether we can keep child benefit but tax it—in other words, return to the old system that applied to family allowances. I am sure that they will have run up against two significant stumbling blocks. The Chancellor separated the taxation of husbands and wives, which I wholly support, but in doing so he made it much harder to tax child benefit. We are committed to the idea of child benefit going to the mother, not to the father. Does that mean that the mother will be taxed? In almost all cases she will be the less well-off partner. If the father were taxed, he could reasonably say that he does not receive the benefit. Therefore, it is hard to tax child benefit.
Some people are attracted by the idea that those who pay the 40 per cent. rate of tax should not be paid child benefit. I concede the plausibility of that argument, but again one runs into severe practical problems. As we were told over and over again when we debated the amendment to the community charge moved by my hon. Friend the Member for Hampshire, East (Mr. Mates), it is impossible

to apply the 40 per cent. tax rate to a new rate of 150 per cent. of the community charge because it would often take a year and a half before people know whether they were on the 40 per cent. tax rate. Exactly the same would apply to child benefit. It would begin to be paid in April, but many people would not know for a good year or more whether they were 40 per cent. taxpayers. So we must face the problem that it is difficult to proceed in this way.
There is also talk—perhaps this is the area at which the Government are looking hardest—of putting more money into families with children, through family credit and income support—the argument of selectivity. We must recognise that there are real problems in making selectivity a universal yardstick in social policy.

Mr. Barry Field: My right hon. Friend has addressed the problem of taxing child benefit. Is he aware that £1·3 billion of child benefit goes to families with incomes in excess of £20,000 a year? How can that possibly be morally, practically or politically justifiable?

Mr. Raison: I shall come to that in a moment. I know that people feel strongly about it.
I revert to the selective approach. My right hon. Friend the Chancellor of the Duchy of Lancaster will recall the so-called Fowler review, carried out by my right hon. Friend the Secretary of State for Employment in 1985. It took a hard look at taxing child benefit, and so on. but came to the view:
We do not therefore propose any changes to the basis of universal child benefit.
In explanation of that, the Green Paper spoke of the unacceptable degree of "churning" and of means testing that would be entailed. So that exhaustive study of our social security system came up with the view that child benefit should remain as it traditionally had been. I can see no new circumstances or arguments that might lead us to reject that point of view now. What was true in 1985 is still true.
Finally, I come to why I believe that child benefit has so much to be said for it. Its first advantage is that it is paid to mothers. Many people in the Conservative party and in other parties have supported that strongly over the years. It is a point of great importance. Although my hon. Friend the Member for Isle of Wight (Mr. Field) talked about people living on £20,000 a year, the benefits of that scale of living often do not find their way into a mother's pocket. There are occasions when the father keeps a rather larger slice of his income than is justifiable. Even when he does not—I do not suggest that the whole human race is as hard as that—it is extremely important that the mother, primarily the non-working mother, should have the certainty that an independent source of income is coming to her. Child benefit has the great advantage of being certain and simple and of not requiring elaborate means testing. Of course we must have means testing in the social services—no one can argue otherwise—but it is of great value to have this one clear-cut benefit.
Child benefit is of particular value to the people whom I have described as the not-quite-poor. Under our social policies there is a risk that those, not necessarily at the bottom of the pile in terms of income, but a bit above it, will find things tough. For them especially, child benefit is of great value.

Mr. Gow: Has my right hon. Friend come across a strange but growing phenomenon, that of the mother, the


very person of whom my right hon. Friend was speaking, going out to work and the father staying at home to look after the child?

Mr. Raison: I have, but I am not quite sure what I am meant to make of that.

Mr. Gow: My right hon. Friend said that the great virtue of child benefit was that it was always paid to the mother. If she is the one who goes out and earns a high income and the improverished father stays at home, how can he justify what he has been saying?

Mr. Raison: I apologise for my obtuseness; I understand my hon. Friend's point now. What he describes does happen, but only in a minority of cases, and I do not think we should build social policy on such a minority.
There is no problem of take-up with child benefit. We know very well that the family credit system which has been introduced and which has many virtues—I am not speaking against it—is so far running at a rate of take-up estimated to be below 50 per cent. Set against that is the certainty that attaches to child benefit. Above all, it avoids the disincentive effect of selective benefits. The leading article in The Times this morning summarised that well:
It is an inevitable consequence of switching from universal benefits to targeted benefits that the unemployment trap is either deepened or widened, or both. By reducing dependency in the population at large, dependency among benefit recipients is increased because the incentive to earn more is reduced by the high effective marginal rate of tax as benefits are withdrawn.
According to The Economist of 22 October:
The introduction of family credit has already increased by three quarters the number of people facing marginal tax-cum-benefit withdrawal rates of 70 per cent. or more.
That is a serious point.
In my party there has been a long history of support for child benefit, or for the principle that those who have children should have direct support from the state. William Pitt enunciated the principle. Back into the 19th century it was achieved through the tax system. It would be sad to abandon it. Above all, I hope that our support of child benefit is a firm signal of a real commitment to the family, about which we talk in the Conservative party. We are absolutely right to do so, and there is no more clear-cut token of our support for the family than child benefit. Long may it remain so.

Dr. David Owen: >: There is no doubt that this debate can have but one purpose: to make the Government—I am glad to see the Chancellor of the Exchequer in his place—rethink their attitude to child benefit. It is true that, over the past few years, there has been a crescendo of discussion of problems related to families—family abuse, alcoholism, violence and split families. I thought that all parts of the House shared a growing anxiety that many of today's social problems have their roots in the family and in something going wrong with it.
Money does not solve every problem in every family—we all know that—but making ends meet at the end of the week can be a major problem for millions of people. Considerable poverty is still concentrated in families,

especially large ones in which the male earner is on low wages. A substantial proportion of people who should claim family income support and go out and get all the means-tested benefits that are theoretically available to them have always not done so—and still do not.
Some families do not take advantage of these means-tested benefits, but one benefit of which they do take advantage is child benefit, which constitutes a large proportion of their income. I think I am right to say that it contributes 18 per cent. of the incomes of families in the bottom 10 per cent. of income distribution. It is thus an extremely important weapon in dealing with family poverty.
We must face the fact that this will be the second time that child benefit has been frozen. It was also cut in November 1985. We should be talking about increasing it to £8·35 a week if we were to replace the April 1988 freeze and the November 1985 cut.
That is the honest answer, because many of the families will not take up other means-tested benefits, even if they are increased over and above inflation. The Chancellor should think again. It is reasonable to say that it is an unselective benefit, there are great problems of churning and, on the face of it, there is something rather silly about paying a benefit to people on high incomes. But the answer to that is a fundamental reform of the tax and benefits system, which the Chancellor still refuses to do. He lost a great opportunity in the most recent Budget. When he was lowering the tax rate from 60 per cent. to 40 per cent., that was the moment to make the national insurance contribution progressive right up through the tax base.
It will be much harder to integrate the tax and benefits system because the Chancellor did not take that opportunity to reform the national insurance contribution, which is, in effect, a tax system, but there is a growing feeling that there must come a day, and fairly soon, when every citizen has one form to fill in each year and as a result he will either benefit or pay out tax. It will be a means test for us all. Within that system, there will be a credit for children and a perfectly acceptable method of clawback for the large amount that needs to go into family income, which would be clawed back from the most wealthy. I know that such a reform would take three or four years to be fulfilled, but in its absence there is no alternative but to insist that the Chancellor does not go ahead with the proposal to freeze child benefit.
I remember that the first debate that I instituted as a Back Bencher, at Christmas 1966, was about family poverty. The present Chancellor of the Duchy of Lancaster, who was previously in the Department of Health and Social Security dealing with social security, understands the problem well. He knows that the provision will hit hard some of the families who can least afford it. For that reason, we shall vote for the Labour party motion, although not for its economics.
As for the Chancellor and the economic issues that face us, the problem seems to be that what we have not been able to achieve is cuts in tax that are then saved. Nobody wants higher tax, but it is vital to be able to save. The savings ratio is lower today than it has been for 30 years. Although the Chancellor announced a new savings measure in his speech to the Conservative party, it has been postponed until the new year—I imagine because he is worried about the success of the launch of the sale of British Steel rather than for any other reason. There is a strong case for that savings bond to be issued as soon as


possible. The right hon. Gentleman has not yet announced the terms for it, but there is a strong case for the interest rate to be 10 per cent. net over five years and for there to be a £50,000 limit.
I hope that the right hon. Gentleman will introduce an imaginative way of siphoning off what is at the moment spending power that should be pushed into savings. I hope that he will also look at the French scheme, Loi Monory, for trying to use fiscal incentives to encourage wider share ownership, which is particularly attractive to middle income earners. There is now a real gap in the fiscal armoury, in encouraging savings. That is absolutely fundamental if the Chancellor is to be able to pull back the present consumer boom.
Most people have considered whether one can have selective restrictions on borrowing. I confess that I have not yet seen any that would not escape. One of the problems of deregulation is that it has made it immensely difficult to have the consumer constraints, selectively applied, that we used to have in the past. I wish that I could be convinced. If somebody had a good scheme, I should look at it.
The problem of using interest rates is that they are a blunt instrument. It will have to be used over the next five or six months; otherwise, we could have a serious slide in the sterling rate. Therefore, the Chancellor must look again at a selective measure to help first-time house purchasers. We must face the fact that in some parts of the country an initial house purchase entails a large sum of money. The increases in mortgage rates will be crippling and will hit hard young couples and first-time purchasers.
I for one believe that, in the problem that the Chancellor faces, which is what weight to give to inflation and what weight to give to the balance of payments crisis, he is right to give the maximum weight to inflation. Inasmuch as an anti-inflationary stance is now vital, there is no question but that the right hon. Gentleman must continue to be ready to make our interest rates higher than we should wish for our manufacturing industries. Again, he must consider a selective measure which, I agree, has the same problem of leakage that I mentioned over restraining consumer spending, and—this is a problem for the Chancellor of the Duchy of Lancaster—he should try to let industry borrow at preferential rates.
I know that in arbitrage and other things it is easy to escape it, but there are countries that operate schemes that give preference to industrial investment. Interest rates are staggeringly high in comparison with other countries, and the Chancellor suggested in his Mansion House speech that we might face a balance of payments problem all through 1989, which suggests pretty high interest rates during that time, perhaps into 1992. If that happens, we must consider the effect on manufacturing industry.
Manufacturing industry must consider its own problems. We face a 9·25 per cent. increase in earnings, and once again we are in grave jeopardy of pricing ourselves out of export markets. That is vital. I should find it easier to listen a little more attentively to industry's complaints about a non-competitive exchange rate if we were not seeing earnings rising at the present rate.
The Chancellor admitted that he made a mistake in the Budget. It is reasonable to make a mistake. I was interested to hear what he said today: "I might have made a mistake." I believe that in an interview with Mr. Walden, he said that perhaps his Budget judgment was not absolutely perfect.

Mr. Lawson: As I said to Mr. Walden, who is a former colleague of the right hon. Gentleman, it was not the Budget about which I had any second thoughts at all—I stand by that judgment and that Budget totally—but with the benefit of hindsight, had I known the strength of the economy and the extent to which borrowing was increasing, I should have had monetary policy tighter at an earlier stage. I would not have reduced it as much prior to the Budget.

Dr. Owen: I have never believed that one can run the economy just on one aspect of it. Monetary policy has been too loose and is probably still too loose, but I do not think that that of itself would have achieved what we want. The point that I was making to the right hon. Gentleman is that, if one is making substantial tax reductions, one is well advised to try to ensure that that does not all go into consumption. The fact is that a substantial amount of that drop from 60 per cent. to 40 per cent. in the top rates of tax has gone into consumption, not savings. At the same time as making that tax cut, a prudent Chancellor would have launched a savings initative of the sort that I described. However, we are in this mess now—

Mr. Oppenheim: Will the right hon. Gentleman give way?

Dr. Owen: No, because we must keep speeches short.
This mess is not yet of crisis proportions. The balance of payments is fundable and the surplus is strong. The only thing that would make it into a crisis would be if people saw that the inflation rate was out of control, and if we eroded our competitive edge. At that stage, however high interest rates went, people would like very much to take a risk and speculate on sterling. That must be the Chancellor's main anxiety.
The Chancellor may be lucky. Oil prices may be coming down, the other commodity markets may be coming down and it may be possible to relax interest rates towards the middle of next year, but what we want from the right hon. Gentleman is a little less brazenness. There is no reason to be ashamed of admitting that there is a marginal error. The right hon. Gentleman has had quite a good success rate. He should show the capacity to make an adjustment when there has been an error.
Many of us are worried about the problem of looking at public expenditure and not looking at tax and fiscal policy. The Government announce their public expenditure review months in advance of the Budget. The Secretary of State for Social Services has been told to cut his overall budget. That has resulted in a freeze in child benefit, but the amount saved could be saved in other ways by means of fairly minor fiscal adjustments. There is an inability to bring together public expenditure and fiscal policy.
I shall end as I began, by saying that the most fundamental reform is an integrated tax and benefit system that would give a guaranteed minimum income for everybody. That is better than minimum wage legislation, which is extremely inflationary. A guaranteed minimum income would obviate arguments about child benefit. That is the correct reform, but unless it is started early in this Parliament, it will not be introduced at all, and we shall continue to spatchcock along with the benefit and tax systems always slightly out of tune and creating anomalies, adding to poverty traps and to the general muddle of the


scheme. The Chancellor has not shown a great deal of interest in this area of reform, but I hope that he will put it higher in his list of Budget priorities.

Mr. Anthony Coombs: When I read a motion from the Labour party alleging Government mismanagement of the economy, I detect an air of unreality and a lack of conviction. Perhaps that is not surprising, given their appalling record of economic mismanagement in the last years of the 1970s and their apparent problems in agreeing economic and financial policies since then. A former Home Secretary, the right hon. Member for Morley and Leeds, South (Mr. Rees), said, I think on 2 September, that he thought the Labour party was politically incompetent and that, even after nine years of opposition, it had not put itself in a position where people would trust it.
The principal reason for not trusting the Labour party is that the British people have a nasty habit of judging people on their record and up to 1979, Labour's record was abysmal. In 1978, the Brooking Institute talked about Britain's economic performance and said:
Britain's economic malaise starts from its productivity problem, whose origins lie deep in the social system.
The institute thought that the malaise was so bad that it was incapable of being remedied. When Sir Nicholas Henderson reported to the right hon. Member for Plymouth, Devonport (Dr. Owen) about the British economy, he said that it was the sick man of Europe.
To illustrate the difficulties of the economy in those days, I shall look at three important areas, the first of which is productivity. It was growing at only two thirds the rate of that of our OECD neighbours, and GNP had fallen so far that Britain, with a population similar to those of Germany and France, was producing just over half the amount of production of Germany and only two thirds of that of France.
The second area is tax. There is no doubt that the Labour Chancellor of the Exchequer made good Labour's promise to make the productive pips of the economy squeak. Basic and top rates of tax were the highest in Europe, apart from those in Sweden. Equally damaging under Labour were the systems of capital relief, tax convenants and stock reliefs. Those systems not only reduced incentives for business but meant that business men too often spent their time looking at schemes that did not justify themselves on grounds of economy but only on grounds of taxation, such as container leasing. As a result, they did not spend time looking at management design quality and at improvements in industrial relations connected with the real growth of their companies and of the economy.
The third area of concern under Labour was attitudes. There was high inflation, low growth and deteriorating industrial relations. Job flexibility was destroyed and the strike record was worse than anywhere in Europe. That brought about a culture which set management against work force, and people did not act in a unified way to improve the economy. As a result, the economy was over-taxed, hyper-inflated, trussed up and rigidified when we took it over in 1979. To their eternal credit, the Government have cut the economy free, deregulated it and

made it more flexible. They have lowered rates of taxation to produce dramatic improvements in productivity, and most important in attitudes.

Mr. John Battle: The hon. Gentleman says that the British people judge people by what they do. Perhaps they also judge them by what they say. What does he think of the 1987 Conservative manifesto pledge that child benefit would continue to be paid in the way that it was then? Will he tell us what that meant?

Mr. Coombs: That pledge meant what it said. From what I hear, no decisions have been made about child benefit and the Opposition are indulging in unconstructive and damaging speculation.[Interruption.] Perhaps Opposition Members would allow me to return to the topic of productivity. I have no doubt that they do not want to hear about that because they know that, since 1980, Britain's productivity has improved faster than that of any other country except Japan, and that the average productivity of each worker has increased by no less than 50 per cent.
The rate of growth in investment is the best for 25 years and the Confederation of British Industry says that profitability, which engenders growth, investment and jobs, is at a 20-year high. That is why we have had increased investment: it is not because of cheap money but because companies have seen that their profitability is high and are able to fund their investments out of profits. After eight years of sustained and continous growth, they have confidence in Britain and know that they will see a rapid pay back of their investment. That is why we have increased investment in the economy, and it has little to do with any temporary rise in interest rates.
The confidence has spread to the venture capital industry, which is now doing business worth £1 billion a year as against nothing in 1979. The population as a whole has felt that increase in confidence, because 21 per cent. of our people have bought shares. No one is saying that productivity does not need to be improved, because in any economy productivity needs to improve. The CBI has said that average productivity in the United Kingdom is still 10 years behind that of France and Germany and 25 per cent. below the European average. As Sir John Egan has said, Jaguar's productivity is one third below that of Mercedes. Our competitiveness in car markets is kept up because our real labour costs are 50 to 60 per cent. below those of Germany.
The exchange rate against the mark, in which we are doing an increasing amount of business, is 3·14. That may be a bit high, but four years ago it was 4·25. That is a significant improvement. It is no answer to these problems to decrease consumer spending through hire purchase controls, which would not work anyway, or to increase taxation, which would work but which would shatter the confidence of industry and reduce the investments that it has been making to such good effect. It is no answer artificially to reduce the value of the currency, because even the Select Committee on the Treasury and Civil Service has admitted that that would be counterproductive and probably ineffective.
It is important to improve the productive supply side of the economy by increasing the skills of our existing work force through better training: I agree with what the hon. Member for Berwick-upon-Tweed (Mr. Beith) said about that. It is of major concern that 69 per cent. of our


companies recognise problems of skills shortages. The Government have introduced the biggest training programme in Britain's history, but the majority of firms do not take sufficiently seriously their responsibilities for training. Whether we change it through fiscal encouragement or, as in France and Germany, through statutory requirements, this is a matter which the Government must examine.

Mr. Morgan: I think that we are reaching an area of agreement, at least between Back Benchers on both sides of the House. The hon. Gentleman is stating an important truth: employment training has no bearing on skills shortages. It does not lead to city and guilds-type qualifications such as France and Germany are concentrating on; it is purely probationary or rehabilitative training for the first six months. It is what used to be accepted as part of people's first six months on the job. Is the hon. Gentleman saying that it has nothing to do with skill training? I think he is.

Mr. Coombs: The employment training scheme, which is directed towards the long-term unemployed, puts people into a situation where they can be picked up by firms, whereupon it is the firm's responsibility to provide a higher level of training.
Improvements in taxation have been equally profound. Tax rates have decreased and provided incentives, but revenue has risen by 40 per cent. in real terms as a result.
The reductions in taxation mean that the system now works more equitably than it did in 1979. Because personal allowances have been increased by 25 per cent. ahead of inflation, 1·7 million people who would have been in taxation if the Labour party had still been in power are not in taxation. Because top rates have been reduced, the top 5 per cent. of taxpayers pay one sixth more now in real terms than they did in 1979 but pay a higher proportion of the total tax bill than they did in 1979.
A lower tax rate regime increases incentives, is more efficient and has been more equitable—benefits which were not available under the Labour party's high tax regime, when the tax that people paid often depended on what they could afford to pay grossly overpaid tax consultants.
One of the most important improvements to take place during the past nine years is in attitudes in industry. The old antagonism and confrontation have given way to a more co-operative, flexible and unified atmosphere in the vast majority of companies. People realise that industrial success depends on unified effort and not on scrambling over what are regarded as the spoils.
The fall in the number of industrial disputes is evidence of that. One might say that the fall in union membership, despite the increase in the number of jobs during the past few years, is another. Recent CBI figures show that about 30 per cent. of pay settlements involve agreed changes to cope with new technology, improvements in productivity or demarcation changes.
More significant still is the fact that a recent Gallup-CBI survey showed that no fewer than two thirds of private sector employees think that pay increases should come only from increases in productivity or profitability in firms. I regard that as a sea change in attitudes. It has come not from union leaders but from people on the shop floor who must make a unified effort with management to increase profitability and prosperity.
I agree with the right hon. Member for Devonport about increased realism in wage settlements. It is worrying, although we have a 7 per cent. increase in productivity, to read of a 9·25 per cent. increase in wages. I have just read the October report from the German embassy, which shows that, despite the fact that their economy is growing at 4·9 per cent. a year, wage costs have not risen at all.
Relations between schools and industry must be more deep-rooted and systematic. It is worrying that 60 per cent. of firms have no links with schools, and that 60 per cent. of schools have no effective links with industry.
This realism and improvement in attitude depends more than anything else on wage bargaining being done at a local rather than a national level. Plant level wage bargaining makes for better competition and better labour mobility. That builds on the principal premise that has ensured economic revival—which is that the Government should provide a low-tax, minimum-interference framework which allows business to prosper and improve prosperity.
The OECD says that we have had years of decline in the 1980s, but that the long trend of decline against other countries has been reversed. In the 1990s, provided that those policies and others which I have outlined are continued, I believe that we can regain our position as the most prosperous nation in Europe.

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. Harold Walker): Order. I remind the House of Mr. Speaker's earlier appeal for brief speeches and for 10–minute speeches from 6 pm.

Mr. David Blunkett: I congratulate the Government on their confidence, propaganda and sheer gall when dealing with the long-term prospects for the economic well-being of the country.
If Chancellor Kohl had not already used the term, I am sure that he would use it in regard to the Chancellor of the Exchequer, instead of Mikhail Gorbachev, to describe his success at self-delusion and the national delusion that the Government have achieved. If that were done by any other party, Conservative Members would have torn it apart and encouraged the media to take a very different view each night on television and radio and each morning in the newspapers about the real long-term prospects for the nation.
If investment in manufacturing industry and output from it fall to an abysmally low level, and they are improved even by only a modicum, one can talk about massive growth. If unemployment reaches such a catastrophic high that any downturn appears to be a great boon, people can convince themselves and others that they are doing well. People can persuade themselves that a reduction in savings is somehow a good thing, whereas in the past they preached that it was a bad thing. People can convince themselves that their most sacred of cows—the inflation rate—is not all that bad because it is not as bad as it used to be.
In Japan, inflation is 0·7 per cent., in Holland 0·9 per cent., in Belgium 1·2 per cent., in West Germany 1·4 per cent., in Switzerland 2 per cent., in France 3 per cent., in the United States 4 per cent., in Canada 4·1 per cent., in Italy 5 per cent., in Spain 5·7 per cent., in Sweden 5·8 per cent. and in the United Kingdom 5·9 per cent. We can tell


people that although our inflation rate—the thing to which we have pinned our flag, the mast which we count as the most important symbol of our success after massive unemployment, after a downturn in the key parts of our economy which earn our wealth and in the teeth of the most catastrophic balance of trade figures ever—is one of the highest in the Western world, we are really doing well.
We know that people have felt better off. There are four major wells on which the Government have drawn. One is the diminishing and misused oil well, of which we should have made better use. Benefit levels and our responsibility for the poor has been another, in that we have cut benefits and reduced the well-being of the poor. We have drawn off from them to give to the better off.
It comes ill from Conservative Members to speak of how the less well off will feel aggrieved if the rich manage to get a little extra in child benefit. Conservative policy has been based on taking from the poor and giving to the better off in substantial measure through taxation and other hidden benefits.
Of course, there has been the well of public spending cuts, which have reduced investment in education and in the key sectors of our economy, in transport, in higher education and training and in the way that we look to the future for not a shabby, but a sensible and sane society.
The biggest well of all has been the sale of our public assets. During the past eight or nine years we have raised £24 billion from among others, the sale of British Gas at £7·7 billion, British Petroleum at £6·5 billion and British Telecom at £3·6 billion. Now we face the sale of the water industry at a knockdown price of £7 billion—apparently a quarter of its true value and electricity at between £15 billion and £18 billion, making a staggering £50 billion from asset sales.
We used to hear from the Prime Minister and from other Conservative Members about the thrifty family which would look after its own. We used to hear about not printing money—until the invention of the elastic-sided plastic card which is now the road to everywhere. Credit has risen as a proportion of GDP from 40 per cent. to more than 80 per cent. a bonanza in debt that British people never thought possible. Yet it is encouraged and applauded as a short-term method of gaining popularity.
We used to hear about farmers and not eating the seedcorn that we should be setting aside for the future. The farmer has cows and hens producing milk and eggs for himself and his family and for those to whom he can sell such produce. Some of the cows may have been sacred cows and some of the hens may have been bantams, but they are fattened up, made more sleek and encouraged to be more efficient in their output. Just at the point at which they were all increasing their yield, the farmer has the bright idea to sell off his cows and his hens for whatever price he can get and go down to the local alehouse and buy everybody a round to make himself really popular. That is an alehouse economy—a lager land with froth on the top and a lot of gas underneath. What happens? Having spent the money that he has gained from the sale of essential assets, he gets home to find that not only has he no money to buy the seed for future sowing and reaping, but he has to buy milk and eggs at extortionate rates from the people to whom he sold them because they now control the market to which he previously contributed.
That is the economy of the future. We are selling not only the seedcorn, but the seed itself. That sort of economy is a road to nowhere. It is making money out of money and not earning it. It is not seeking to invest in a partnership for the future with the people of this country.
We hear about France and Germany, where prosperity has been built on a partnership between public and private sectors. The banks—the länder banks and the city banks—are the biggest finance sector in the Federal Republic of Germany guiding not through central planning but through communities and the Government genuinely working together.
The answer for the future well-being of this country is, of course, enterprise and increased productivity, but enterprise and productivity based on the well-being of our people. This debate is about not simply competence or a balanced economy, but the values that we, as a civilised society, hold and the way in which we use our economy, because politics is superior to economics. The debate is about using democracy to ensure well-being not only for ourselves and popularity for the moment, but for investing and ensuring that our children and grandchildren have something of which to be proud.

Mr. Ian Gow: I join my right hon. Friend the Member for Aylesbury (Mr. Raison) in paying tribute to the maiden speech of my hon. Friend the Member for Kensington (Mr. Fishburn) to which the House listened with such admiration. I am sure that the whole House envied his ability to speak without notes and the quality of his speech, notably his tribute to Sir Brandon Rhys Williams.
I begin by examining the amendment which stands in the name of the Liberal party. Unfortunately, no spokesman from that party is present, and the entire Liberal Bench is empty. The amendment stands in the name of the new leader of the Liberal party, and beneath his name is that of the shadow Chancellor of the Liberal party. Those two names appear first above the amendment. I consider it a matter of deep regret that those two names were not reversed. In my opinion, the hon. Member for Berwick-upon-Tweed (Mr. Beith) has qualities infinitely greater than those possessed by the hon. Member for Yeovil (Mr. Ashdown). Nevertheless, I have to qualify that tribute when I read the words of the amendment tabled by the Liberal party. I commend them to your serious attention, Mr. Speaker.

Mr. Speaker: Order. I read them, but I did not select them for debate.

Mr. Gow: I was about to congratulate you, Mr. Speaker, on your wisdom.
The words, although not selected for debate, bear repetition, even in the absence of the authors. This is what they sought to add to the motion which stands in the name of the right hon. Gentleman the Leader of the Opposition, and which is absolutely characteristic of the muddled, pathetic, confused, mixed thinking which has characterised the band of visionary Liberals with neither vision nor mission:
while encouraging the development of a successful enterprise economy throughout the United Kingdom and playing a full part in the development of co-ordinated European economic policies and institutions".


Who could have been the author of those words? How could they have placed them upon the Order Paper? How wise you were, Mr. Speaker, not to select that amendment.
I now turn to the speech of the hon. Member for Dunfermline, East (Mr. Brown). It was a speech which I enjoyed, but it did not offer the House or all those outside an alternative strategy to that of the Government. I shall devote almost all my speech to a single issue: mindful of your injunction, Mr. Speaker, that we should speak for a maximum of 10 minutes, I wish to talk about inflation, a subject upon which the Opposition are qualified to speak but about which the hon. Member for Dunfermline, East did not speak.
Our debate takes place in the absence of my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). My hon. Friend the Member for Horsham (Sir P. Hordern) is sitting in his place, and is a worthy replacement. My hon. Friend the Member for Horsham never believed that which my right hon. Friend the Member for Old Bexley and Sidcup believed—that it was possible by passing an Act of Parliament to abate or to hold down prices. That was never the view of my hon. Friend the Member for Horsham. Sometimes, I believe that it is still the view of those who sit—although not presently—on the Liberal Bench.
At least I exonerate the Labour party from believing that it is possible by Act of Parliament to hold down or restrain prices. Unfortunately, the consequences of the arrival at No. 11 Downing street of any Labour Chancellor are certain—first, a massive loss of overseas confidence, and consequential withdrawal by people overseas of massive funds presently in London, and, secondly, a continuing rise in inflation.
The hon. Member for Dunfermline, East did not address his mind to the inevitable consequences of Labour policy. The endemic problem of inflation was addressed first by my right hon. and learned Friend the Foreign Secretary and then by my right hon. Friend the Chancellor. I was pleased when my right hon. Friend the Chancellor, first in his speech and secondly in an intervention during the speech of the right hon. Member for Plymouth, Devonport (Dr. Owen), said that, with the advantage of hindsight, he should not have reduced interest rates after the Budget.

Mr. Morgan: And top rate tax.

Mr. Gow: I am in respectful agreement with my right hon. Friend the Chancellor. He told the House twice this afternoon that it was a mistake to reduce interest rates after the Budget. I believe also that the Budget judgment made in March was correct and that, in so far as error has followed that judgment, it was about the interest rates—although it is easier to say that after the event than to say it at the time.
I want to say something to the Labour party, because it is most in need of instruction on this matter. There is one other certainty—that a policy of high interest rates will abate inflation.

Mr. Nicholas Budgen: Eventually.

Mr. Gow: My hon. Friend uses the word "eventually". It is not the view of my right hon. Friend the Chancellor, and it is certainly not my view, that a policy of high interest rates will abate inflation instantly. Therefore, I agree with

my right hon. Friend the Chancellor and my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen). The policy of high interest rates will succeed. I hope that my right hon. Friend the Chancellor will persevere in that policy.

Mr. Budgen: That is the thing.

Mr. Gow: I am getting support from my hon. Friend. My right hon. Friend the Chancellor rightly said in the House this afternoon, at the Mansion House last week and before then at the conference in Brighton, and my right hon. Friend the First Lord of the Treasury said in the House today and last week, that we will persevere with a policy of high interest rates because it remains the Government's continuing commitment to abate the evil of inflation.
I want to say something to my right hon. Friend the Chancellor; I shall say it in public because I have said it to him in private before. After 12 years of Conservative government, we should have achieved the attainable goal of stable prices. That would have been possible if we had followed the policies which were necessary and which we could have followed consistently over a period of 12 years.

Mr. Battle: Will the hon. Gentleman give way?

Mr. Gow: I shall certainly give way. I shall give way to any Opposition Member until I use up my 10 minutes.

Mr. Battle: I should like to hear how the hon. Gentleman, who says that prices remain stable, explains the increase in electricity prices.

Mr. Gow: I apologise to the hon. Gentleman. Clearly, I was not talking in such a manner that he could hear what I was saying. Some of us do not speak as clearly as others, and I apologise to the House. I was saying that it would have been possible for a Conservative Government in office for 12 years to achieve stable prices at the end of that period. I regret that I do not think that we shall achieve that aim. I believe that an economy in which there is zero inflation is likely also to produce full employment and economic growth.
We have heard from the right hon. Member for Devonport about the dangers, as he sees them, of high interest rates and of a high exchange rate. There is not a single exporter—or if there is, I have yet to meet him—who does not say, "Of course, it would be so much easier if the sterling exchange rate were lower." We hear that constant refrain from all those who export. We are entitled to reply that those countries which have been the most successful in providing full employment and growth for their people and in achieving a high rate of exporting are those with the strongest currencies. Three examples are Germany, Switzerland and Japan—all of whose currencies have been among the strongest.
I very much hope that, when there is an opportunity for a further Supply Day, the subject of the economy will again be chosen, because we shall have the opportunity to listen—alas, in vain for a coherent alternative from the Labour party.

Mr. Jim Cousins: I join the right hon. Member for Aylesbury (Mr. Raison) in congratulating the hon. Member for Kensington (Mr.


Fishburn) on his maiden speech and in hoping that the hon. Gentleman will prove to be as strong a defender of child benefit as his predecessor.
I congratulate the hon. Member for Eastbourne (Mr. Gow), who has offered us the prospect of a war of attrition in which the Government's economic policies will rely heavily upon the single weapon of interest rates. We cannot confidently predict the outcome of an economic policy that centres only on interest rates, but we can confidently say that in that kind of war of attrition the casualty lists will be long and will come from parts of the country represented by the Opposition. In that respect, I want to follow my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) who, in an excellent speech, described what he called the economy of the future. In that he made a mistake. It is not the economy of the future; it is the economy of the present.
The Chancellor described a policy of bluffing it out and charging on, hoping that luck would hold. He did not offer those of us who represent the north and Scotland any signal revealing the Government's industrial policy. It may be asking the Chancellor too much to provide us with an industrial policy. He has only one policy—the instrument of interest rates. As summer turned to high summer and then to autumn he had already played such a varied range of tunes on that policy instrument that it was probably unreasonable to expect that he would supply an industrial policy as well.
On industrial policy, the Chancellor is content to be a spectator. I refer to his present rather than to his past. His right hon. and noble Friend the Secretary of State for Trade and Industry has a policy which we have seen in action today. It is the kind of policy that many of us have seen in action at children's parties—one stops the music from time to time, takes away a chair and sees who is left. We can see that clearly in action in our communities.
The Chancellor has spoken of the growth of small businesses, and we welcome that. I very much hope that before the end of this week we shall see one more small business join the 999 to which the Chancellor has referred, and I hope that that small business will be based on the Wearside shipyards currently belonging to North East Shipbuilders Limited. All of us from the north-east hope that one additional small business will be in place by the end of the week, and we shall be sorely disappointed if it is not.
While the Chancellor talks about the growth in small business, we are witnessing the greatest expansion of concentrated industrial economic power at any stage of the industrial history of this country. In the past year, there have been nearly 1,200 mergers and acquisitions. Indeed, much of the so-called investment referred to by the Chancellor is actually acquisition rather than investment. Forty per cent. of the net borrowing of industry in the past year was for the purpose of acquisition. The Chancellor makes the fatal mistake of confusing acquisition with investment. Following the Rowntree merger, Tyneside now faces the projected takeover or merger of Scottish and Newcastle Breweries with Elders Courage. That is typical of the industrial policy unfolding in many of our cities.
The significant thing about that policy is that it depends not at all on industrial structure or industrial logic; it is simply an exercise of finance. Old-age pensioners in my

constituency who have worked all their lives and bought their homes many years ago wish to find a method of converting the equity represented by their houses into income to see them through the rest of their lives. The hon. Member for Bournemouth, West (Mr. Butterfill) pressed for such a measure in the Budget proposals and it was a pity that he did not put the matter to the test.
While the old-age pensioners in my constituency find themselves unable to translate their equity into income, the current wave of mergers and takeovers ignores all distinctions between capital and revenue, debt and equity, future and present. It is a vast exercise in speculation, with the prospect of asset stripping. It is not based on industrial logic, industrial investment or any kind of industrial strategy.
Apparently this week is national chemistry week and in Westminster Hall there is an exhibition by the Royal Society of Chemistry. As the Prime Minister is a graduate in chemistry, that is entirely appropriate; but it is surprising that one university chemistry department has closed every year that she has been in power and we now have the prospect of half the remaining departments having to close.

Mr. Morgan: It is perhaps not so surprising when one considers that, after working for three years in chemistry, the right hon. Lady rapidly discovered that she would be better off working as a tax lawyer.

Mr. Cousins: That comment connects with the point made by my hon. Friend the Member for Brightside about the economy of the future. My concern is to point out that it is not the economy of the future but the economy of the present. That is why it is so peculiarly ironic to note the contradiction in the policy of ignoring the long-term industrial future and prospects of this country and the measures necessary to achieve them and in the gross financial speculation currently going on.
Conservative Members talk about the prospects for services, and it is right and proper to bring them into the equation. The city of Newcastle has been primarily a centre for service industry employment for at least 50 years. It is right and proper to bring services as well as industry into the equation but the signs that we have seen in industry are already clearly present in the service sector. The Chancellor has had to withdraw from the national accounts that old friend of his in the monthly trade figures—the balancing item—which saw him through many difficult days in 1987 when the figures had to be padded for the purposes of winning a general election. The Chancellor's old friend, the balancing item, has been withdrawn hurt, for the simple reason that the calculations that underpin that balancing item show that it no longer exists.
The same trend that we have seen in Britain's visible trade is clearly evident and developing in our invisible trade. It is crystal clear that Japanese banks, such as Nomura and Daiwa, will do to the City what industries such as Nissan and Mitsubishi have done to the cities. The same trends are unmistakably in prospect. It is thus peculiarly ironic that those same Japanese banks should be at the centre of so much of the industrial speculation rather than investment that is currently taking place.
It is interesting to end with the example of Japan, as in many ways it illustrates the real prospects for the Chancellor. Apparently, he will not change his policy.


Sadly, he will not be allowed to change his job. All that lies before him is the fate that befell the unfortunate Japanese financial manager only last week—the dull squelch as the concrete blanket finally hits the swamp.

Mr. John Redwood: The hon. Member for Dunfermline, East (Mr. Brown) gave the only semi-coherent account of the Opposition stance on the economy, but he found it extremely difficult to get anywhere even by way of landing any punches in his attack, let alone in setting out any alternative which might be better than that currently being pursued. I counted some six howlers in his schoolboy exegesis of the problem—[HON. MEMBERS: "Only six?"] It was a relatively short speech by the hon. Gentleman's standards.
First, the hon. Member for Dunfermline, East believed that the problem in the United Kingdom economy was that of an overheated south-east and an underheated regional economy beyond. The hon. Gentleman is several weeks or months out of date, as there is now a noticeable tendency for the prosperity, jobs and activity to spread northwards and westwards. Three examples come to mind. A firm in my constituency, in textiles, recently announced expansion plans for Cleveland in the belief that it would be easier to recruit labour and to find cheaper property there than in the Reading area. There is also the Ford decision for a major investment in south Wales and the very welcome Pilkington decision to put major investment into St. Helens rather than Kent, although it wishes to service the south-eastern market, because that company, too, realises that it is easier to recruit labour and to find cheaper property in the north than in the south.
The second problem that the hon. Member for Dunfermline, East failed to address was the question how inflation could be brought under control. The hon. Gentleman cast aspersions on the idea that interest rates might do the job, but without much conviction. Interest rates are doing the job, and they may do it within a reasonable time scale—a matter of some months, over this winter and into next year. That is already evident from the slowing down of the housing market, which is most noticeable in London and the south-east, and the decline in the rate of increase in mortgage advances. People are responding to the high rate of interest, which stands to reason. After all, interest rates are a price, like many others in the economy: if the price is raised, people save more and borrow less, and vice versa. The medicine will work.
The third area about which the hon. Gentleman became rather worked up was child benefit. He attacked a policy that has not been announced or even been finally determined. Even on the assumption that he was correct to forecast a freeze, he was wide of the mark. Why should the Labour party want to give increased child benefit to the countess and the millionairess when they have already benefited from the tax reduction in the Budget? Why should it want to turn down the idea of giving more targeted help to those most in need of it—those poorer families who are making the effort to go to work despite some of the difficulties of the tax and benefit structure, which has already been reformed and could be strengthened by more generous family credit?
Is it not interesting to note that the last occasion that the Labour party increased child benefit, when an election was not immediately in sight, was in November 1977,

when it raised it to the magnificent sum of £1 per week for the first child. Today, child benefit for the first child is £7·25–7·25 times higher in nominal terms and a substantial increase in real terms. It is humbug for the Labour party to protest too much about child benefit.
Fourth came the scholarship question, which the hon. Gentleman quite simply funked—whether a balance of payments deficit when not conjoined with a fiscal deficit is more benign. Of course it is, because the private sector is making judgments about how much money it wants to borrow and whether it can obtain an economic return on that money. The private sector knows that it can finance that deficit for a short time, much of which is incurred to import necessary intermediate and capital goods to increase the capacity of the industrial economy. It is welcome that industrial capacity is now expanding rapidly, and we must ensure that it is financed in a prudent way, which the interest rate changes will help to guarantee.
Fifthly, the hon. Gentleman believes that the balance of payments cannot be corrected under current policies. That is very misleading. One of the main problems in the balance of payment figures for this year and last year was the large deficit on engineered manufactured products with the Federal Republic of Germany. It may amount to £9,000 million this year, which accounts for the bulk of the overall balance of payments deficit. We have not been sufficiently competitive against the Germans, especially in motor vehicles. Part of the problem is that Governments of both persuasions continued to invest in a failed nationalised industry that never managed to become competitive.
I am now much more confident that the motor industry, strengthened by Japanese investment, management and design and by the passage of the Rover group to the private sector—following Jaguar—can put up a better competitive challenge to the Germans in the early 1990s than has been the case under the management and subsidy system of the 1980s. We cannot guarantee that the balance of payments will always be good news for the Opposition—it is quite possible that the investment rate and the new style of management will succeed in winning back those important markets for British manufacturing industry.
The final howler was the hon. Gentleman's feeling that all the Government's success—he conceded that there was some—had been based upon oil revenues and privatisation. I do not know whether he has looked recently at the oil price, which has fallen from about £24 a barrel—its peak in sterling—to £7. That colossal drop has produced a large decline in the oil revenues. If we add the total oil revenues in the current financial year to the total likely proceeds of privatisation, the two will probably just match the Government's financial surplus in the public sector. That is the height of fiscal prudence, and it means that oil revenues and the proceeds from asset sales are being applied to debt reduction. This is exactly the right thing to do when there is some slight worry about inflationary pressures but no worry about the rate of growth, which is extremely strong.
I regret that it is nought out of 10 for the economics of the hon. Gentleman—and where was his alternative strategy? The House has been left in ignorance of whether the Opposition want interest rates to go up or down, whether they want more public borrowing or a smaller public surplus or whether they think it right to run a large public sector surplus, as the Government are doing. We are in complete doubt about how, suddenly, those magic


investments would be found in the public sector, when the evidence of the 1970s is that the Government-led investment programmes helped to eliminate our competitiveness in crucial engineering industries under nationalised control. It is vital that we do not return to the economics of the public madhouse, as advertised by the then Labour Government and now by the Labour Opposition.
How wise the hon. Gentleman was to stick to the attack and not try to produce sensible policies. I must say how much I admired his Nelsonian blind eye when he said that he could see no additional Labour public spending commitment, which amounts to the sum total of £38 billion. There will be many more rows and wrangles in the shadow Cabinet, which will have to go through its equivalent of the Star Chamber. There will be a great deal of blood on the floor before it even gets down to £38 billion of additional public spending commitments, let alone down to none. I hope that, when the Opposition have made their decisions, they will come and tell the House which of the items for which they constantly demand additional spending have been deleted from Labour's programme.

Mr. Thomas McAvoy: The hon. Member for Wokingham (Mr. Redwood) referred to the wisdom of my hon. Friend the hon. Member for Dunfermline, East (Mr. Brown). Many of us could say how wise the hon. Gentleman was not to seek to intervene in my hon. Friend's speech. My hon. Friend gave a searing indictment of the Government's handling of the economy.
If we compare the mood on the Conservative Benches today with that on Budget day, the contrast is quite stark. On Budget day, Conservative Members were beside themselves with joy, not least because of their personal gain from the Chancellor's tax cuts. Since then, a catalogue of disasters has vindicated our consistent criticisms. All the Chancellor's forecasts on the balance of payments, inflation and monetary growth have proved hopelessly wrong. Britain now has a massive balance of payments deficit. Since June, the eighth rises in interest rates have pushed Britain's interest rates well above those of our main industrial competitors and have also meant crippling mortgage payments for millions of home buyers.
During the past few years, growth has been seriously unbalanced, with credit-driven consumption increasing far faster than investment or output. The Budget tax cuts made the position worse. The result is a record trade deficit that appears set to reach £14 billion, and an inflation rate higher than that of any other industrialised nation.
I have already said that our consistent criticism of the Government has been vindicated. To cite just one example, on 16 March my right and learned Friend the Member for Monklands, East (Mr. Smith) said:
the deteriorating balance of payments is the most serious constraint on economic management … in the years immediately ahead of us … eight years or so after reaching oil self-sufficiency",
we are
heading into balance of payments problems again."—[Official Report, 16 March 1988; Vol. 129, c. 1123.]
Underlying the severe balance of payments problem is the damage inflicted on British industry by the

Government since they came to power in 1979. Britain is unique among industrialised countries in that, from 1978 to 1987, our manufacturing output did not grow. By 1987, it was only just back to its level in 1978, Labour's last full year in power.
Comparisons have been made before, and I make no apology for making them again—output in Japan grew by more than 40 per cent., in the USA by 25 per cent. and in Italy by 16 per cent. In 1979, the import penetration of manufactured goods was 25 per cent.; now it is 35 per cent. I represent Glasgow, Rutherglen, which contains a Hoover factory, and we know at first hand the damage that has been done to our market by the penetration of imports. The balance of trade is the best single indicator of the nation's ability to produce goods that people at home and abroad want to buy.
Foreign earnings from North sea oil are declining, and the prospects are not great unless there is a turnaround in investment and in industrial performance. The oil years have been wasted. The previous Labour Government had planned to use oil revenues to improve the infrastructure and to re-equip British industry. The Government have used those revenues to fuel a vast consumer boom. Oil revenues and privatisation may have funded tax reductions, but the Barber-style dash for growth has been neither balanced nor sustainable. Unemployment in many of Britain's less prosperous areas remains high and the trade deficit and increasing inflation show that the end of the Chancellor's ill-conceived boom is in sight.
The Government have always said that low inflation was their number one priority, but our inflation is now the worst among the major industrialised countries, and it is set to go even higher. Interest rate increases are feeding through to mortgages, and the Government are fattening up the electricity industry and British Rail for privatisation. Of course, that entails higher electricity charges and rail fares.
I take no pleasure in illustrating the economic troubles facing the country, because it is our country too and we want to see our people prosper. However, the Government must change course and must not dismiss serious economic indicators as mere blips. The Labour party's proposals to get the nation onto a sound economic path could qualify for the over-used description of "prudent"—a word that will come back to haunt the Chancellor.
The Chancellor should use the Autumn Statement to signal a change in strategy to redress the imbalance between the south-east and the other parts of Britain. He should reverse the top rate tax cuts, which gave the top 5 per cent. £3 billion. He should boost investment in the National Health Service, education, transport and the infrastructure, creating jobs and wealth without floods of imports. He should uprate child benefit in line with inflation. That, after all, would cost only a fraction of the Budget's top rate tax cuts. He should assist industry with a stable pound and lower interest rates. He should implement credit control to slow down the consumer boom without damaging investment. We are putting Labour's proposals forward in a constructive manner, and we hope that the Government will respond likewise.

Mr. Nicholas Budgen: I think that the hon. Member for Glasgow, Rutherglen (Mr. McAvoy) would agree that a theme has emerged from


Conservative Members. It is the theme of the Tories' belief in the need for social cohesion as the most important objective of Government. It is the theme that actuated Sir Brandon Rhys Williams throughout his life and which made him a proponent of indexing child benefit. It is certainly the theme of my right hon. Friend the Member for Aylesbury (Mr. Raison). It is also the theme of those who take some of their views from the Victorian liberals and believe that the most important factor in preserving social cohesion is to have sound money.
It seems to me that the Chancellor faces a very difficult period over the coming months. It is obvious, of course, that he has received a great deal of unwise encouragement from these Benches, as he has taken considerable chances with inflation, particularly over the past three years.
It is most unfortunate that the person who built, brick by brick, the medium term financial strategy so that it might be the prison that would discipline future Chancellors was also the person to smash the prison when he came back as Chancellor to live in it. As editor of The Times, Lord Rees-Mogg supported Peter Jay and Sam Brittan, the two most influential journalists to re-emphasise the importance of monetary control and lay the intellectual framework for the medium term financial strategy. It is significant that in today's edition of The Independent Lord Rees-Mogg should point out that broad money—admittedly defined in a slightly different way, but broad money nevertheless—has been increasing by 22·6 per cent. per annum in this country compared with increases of 6·6 per cent. in the United States, 6·2 per cent. in Germany, 8·1 per cent. in France and 11·1 per cent. in Japan.
That shows that, although the Conservative party has unwisely applauded all the pleasant and euphoric effects of the upturn of a consumer boom—as inflation has been producing its enjoyable effects—we now face a real problem. Of course, my hon. Friends have been delighted to watch the value of their houses increase by 40 per cent. over the past 18 months.

Mr. Gow: No.

Mr. Budgen: Many of them have. Many of them were delighted, too, by the way in which assets such as shares increased so rapidly until autumn last year. Now we are to have the necessary downturn.

Mr. Gould: The stop.

Mr. Budgen: And the stop.
My hon. Friends and I must now support the Chancellor and the Government as they introduce the necessary corrective measures. We shall do that for high Tory reasons because we believe that all those other objectives that are so enjoyable and desirable, such as the creation of wealth, the freeing of markets and the encouragement of enterprise are subsidiary to the necessity for sound money. We shall do so for the containment of inflation because we believe that by letting inflation loose in society we do more to create injustice and envy than—

Mr. Oppenheim: And unemployment.

Mr. Budgen: And unemployment, although I shall leave aside those economic arguments.
By letting inflation loose, we undermine social cohesion. Let me give an example from the debate. A

moment ago, the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) spoke with resentment and envy against speculators and tax lawyers. In a period of upturn of inflation, inflationary circumstances encourage speculation and make speculators prosper. They also make it necessary to employ tax lawyers. It is not the fault of the speculator and the tax lawyer if they respond to the conditions that have been created by the Government.
High interest rates will do the trick eventually. We do not know for how long they will have to be applied. but we do know one thing: if they are not applied for sufficiently long and if the pain does not occur, we shall have a high and rising rate of inflation.
I conclude with one small technical point. Many Conservative Members—ambivalent as I believe them to be about inflation—say that there is a compromise. For example, they say that we can do the trick by imposing some sort of controls on hire purchase lending. In principle, I believe that to have been unfair and wrong in the past, but it is technically no longer possible because those persons who used to be able only to borrow through hire purchase now have bank accounts and can borrow much more cheaply on overdrafts from the bank.
Secondly, it is suggested that it would be possible to make some form of enforceable but voluntary arrangement with the clearing banks by which they designate preferential borrowers. That used to be possible in the days when the clearing banks had a monopoly in lending, but that is no longe possible. For example, if it is said about Alton Towers in Staffordshire that it is part of the candy floss economy, so it may not borrow and borrowing should be confined to farmers or manufacturers, the manager of Alton Towers would simply catch the train to London, see the managing director of Nomura and borrow the money probably at finer rates than he would receive from the Midland bank, Stoke on Trent. Therefore, that is not possible either. I fear that we are in for a difficult period.
I beg my hon. Friends to support the Government, because I believe that the Government are now doing the right thing. I hope that all my hon. Friends will agree that in the end the Tory party is in the business of maintaining our institutions and social cohesion. As the hon. Member for Newcastle upon Tyne, Central has shown in his attacks on speculators and tax lawyers, there is no better way of creating resentment, envy and a lingering sense of injustice than to have inflation.

Mr. Henry McLeish: It is important to put on record our views about the excellent contribution to the debate by my hon. Friend the Member for Dunfermline, East (Mr. Brown). I do not believe that his speech has in any way been undermined by the rather petulant comments of the hon. Member for Wokingham (Mr. Redwood) in giving a blow-by-blow account of it.
I should like to highlight the issue of training and economic performance, which was mentioned by my hon. Friend the Member for Dunfermline, East. This appears to be one of the key areas in which the Government claim success. I and many of my colleagues and commentators, when considering countries within the OECD, feel very uneasy about that sector. One of the principal reasons for emphasising training this evening is that the Government's economic policies are characterised by short-termism—


next year's balance book, and next year's public expenditure figures—when most of our competitors are looking to the long term. They are looking towards reinforcing their infrastructure, of which training is clearly an essential element.
It is important to study some of the countries which the Government seek to ignore in their analysis of where Britain's economic prospects and economic strategy should be going in the months and years ahead. Australia, Canada, Germany, Japan, Sweden, Switzerland and the USA have much to offer the Government. However, instead of a coherent industrial training strategy, we have a mismatch of ideas and programmes borrowed and transferred from certain parts of the United States—policies which I should not like to see replicated throughout the United Kingdom.
We do not study our competitors' policies so that we can transfer every idea, every programme and every piece of innovation. But it is essential for the Government to learn why other countries are more successful in increasing productivity, in tackling skill shortages, and in having a long-term financial and industrial commitment to training rather than selective borrowing of ideas that suit their political strategy and instinct, but do little for the long-term needs of the economy.
The first point is one of consensus, which has become a dirty word for Conservative Members. It is clear, when studying our competitors, that there is a consensus between the social partners—the trade unions, industry and the Government. We shall discover later how our Government deal with consensus. Consensus is no longer about delivery, but is about national objectives and ideas that, can maintain the social and industrial momentum in the years ahead.
The second point is that those competitors value post-16 education. We have heard much from the Government about the MSC, but one cannot help thinking that, because education is largely state-funded, it does not figure on the agenda. It does in competing countries in the OECD and in Europe.
The third point is the interest shown in what I would call effective industrial training. The Government are obsessed with pre-employment vocational training. The reason for that is simply that we are one of the few countries in the industrialised world to have created mass unemployment during the past 10 years. There were few jobs for young people, so the Government had to rely on pre-employment vocational training. It was not that they cared about training: it was seen simply as an alternative to the lengthening dole queues. Most of our competitors are investing in in-company or in-enterprise training. The patchwork of the often incoherent policies of the British Government is not for them. Our competitors see the benefits of in-plant training, which their industrialists finance in partnership with the Government.
The fourth point is an absence of local labour market strategy. What strategy for training do the Government have? This afternoon, when answering questions on employment training, we saw that we had at the Dispatch Box a petulant Secretary of State who was looking for hon. Members to argue with, rather than taking any cognisance of the real issues in local labour markets up and down the country. It appears that the range of the Government's

perception stretches no further than the south-east, and perhaps a little further west. Local labour market strategies are essential. For example, in Germany, with a consensus at local level, there is effective delivery. That is not something that we see happening with this Government.
Our competitors also believe in improving access to university education. They do not want to be countries with low skills and a low-tech service economy. They want knowledge and technology. Young people in this country are not only denied access to university education, but are not given the opportunity to take up a vital role in manufacturing or in our service or hi-tech economy.
The reality of success for our competitors means training that will contribute to their economic performance. That is real and effective training. It is not training as a response to the dole queue. It is not training in terms of a set of incoherent, undefended programmes that respond to the short term. It is not training that is left as an extra to the whims of industry, individuals or the market place. It is training that is a key component of any attempt to have a full employment policy, to have a credible competitive economy and something about which Conservative Members rarely speak—to improve the quality of life for individuals.
Why is it that in this country fewer people continue their education after the age of 16 than is the case with virtually all our industrial competitors? Are Conservative Members aware that in Singapore, Taiwan and Korea more than 85 per cent. of the post-16 age group are receiving education, against 50 per cent. in this country? Until a few years ago, those countries were frowned upon. Japan also boasts a similar percentage of youngsters who remain in education.

Mr. Kenneth Hind: Will the hon. Gentleman give way?

Mr. McLeish: No, I wish to continue.
We are slowly moving towards employment-based training, but industry does not yet have enough enthusiasm to embrace that objective. In Germany, three times as much is spent on in-plant training as in this country. It is estimated that Britain spends 0·15 per cent. of turnover on training, compared with the 1 to 2 per cent. that is spent by the Germans, the Americans and the French. That is a staggering proportion and it highlights the weakness of our approach.
The Government look upon YTS and ET as successes. Other countries do not have similar schemes, basically because they do not need them. In Germany there is a coherent training system—a dual process of education and training—for 16 to 20-year-olds. The Government's programme for 16 to 20-year-old training and for adult training lags well behind that of any comparable country. Our training policies also lack information. It is remarkable that the Government have sought to abuse statistics in such a way that we are now planning for the future on the basis of scant information.
Short-termism lies at the root of many of the evils in our economy and in our training programme. If the Government are serious about the 1990s and the year 2000, they must abandon their superficial, half-hearted, mediocre approach to training and take on some of the ideas that we have proposed.

Mr. Phillip Oppenheim: The Opposition's case against the Government has been based on three criticisms—tax cuts, our manufacturing performance and the credit boom. Opposition spokesmen could have made a valid case by criticising Government policy in other areas, but they have failed to do so and have left that critique to the eloquent speeches from my hon. Friends the Members for Wolverhampton, South-West (Mr. Budgen) and for Eastbourne (Mr. Gow).
Opposition spokesmen have criticised our manufacturing performance, yet under this Government our manufacturing output and manufacturing investment is up and our share of world trade in manufactures is stable for the first time in many years. We should compare that with Labour's record in the 1970s. During the time of the previous Labour Government, manufacturing output fell and we imported three times as many manufactured goods as we exported. Our share of world trade in manufactures was also falling. It is all too easy for the Opposition to forget that.
The Opposition have criticised the Government's tax-cutting policy, and we have heard a great deal of self-righteousness from them about tax cuts. Do the Opposition disapprove of the fact that, as a result of our tax cuts, the amount paid by top rate taxpayers has gone up in absolute terms, in real terms and as a proportion of the total Government tax take? The top rate taxpayer now pays a larger burden than he did when the previous Labour Government were in power. It is only a Labour Opposition who would seek higher taxes that yield less.
The Opposition have criticised us for the credit boom. They too often forget that, although private indebtedness is high, it is founded not on imports, but on the housing market. Apart from private sector indebtedness, the Government are in surplus, as is industry. That is a radical change from the 1970s when, although private sector indebtedness was not as high, the Government and industry were heavily in debt.
There seems to be a fundamental inconsistency in the Opposition's policies regarding spending and borrowing. They seem to believe that public spending is all right, but they bitterly criticise private spending, be it by private consumers or by private sector industry.
Of course there are problems, which have been adequately outlined this afternoon. Those problems relate to the supply side of the economy and are also largely caused by the fact that the Government—I believe unwisely—let interest rates drift too low in the past few years. I accept that it is far easier to say that with hindsight. This time last year, all the pundits were urging the Government to cut interest rates to avoid the problems of 1929, when the world moved into a recession because interest rates were not cut.
Earlier this year, there was a great wailing about the so-called strength of the pound, even though it was weaker than it had been two or three years earlier. As a result of complaints about the strength of the pound, the Chancellor was unwisely prevailed upon to cut interest rates, despite the fact that some had pointed out to him the fact that those countries with the strongest economies, the lowest unemployment and the best export records were precisely those countries whose exchange rates had risen consistently in the past 30 years.
It has been argued that a higher savings ratio is needed. Certainly an increase in interest rates will help to achieve that, as will lower taxes on savings. A feature of some of the most successful economies in the world is that they have virtually no tax on savings and, conversely, they have not given the tax breaks that many Western countries have given to aid consumption. That is important.
I was somewhat surprised to hear the right hon. Member for Plymouth, Devonport (Dr. Owen) complain that savings in this country were too low. When he was in government, the enormous taxes that were levied on anyone who saved as a result of direct taxes and inflation meant that it was almost impossible to save. The next time the right hon. Gentleman complains about the low savings ratio, someone should point out to him what happened in the past.
Virtually all the remedies that the Opposition have promoted over the past four years would exacerbate the current problems. In 1984, the Leader of the Opposition lauded to the skies the example of the American economy, which had gone heavily into budget deficit. He urged the Government to follow the American example and massively increase public spending and lower interest rates so as to bring the value of sterling down. By 1987, he seemed to have forgotten his urgent advice, especially when the chickens had come home to roost in the American economy. That advice, however, was offered not only by the Leader of the Opposition but by many of his minions and, I am afraid to say, it also emanated from the Conservative Benches. If that advice had been taken, our problems today would be infinitely worse. Out credit boom would have been even bigger and our balance of payments problem would have been significantly worse. Undoubtedly, inflation would also have been higher.
One of the most extraordinary aspects of the debate has been how, one by one, Opposition Members have got up and praised Governments who have been consistently Right-wing in their economic policies. They have urged the Government to use them as models. I was amazed that not only the hon. Member for Dunfermline, East (Mr. Brown) but also about five of his hon. Friends praised Singapore, Taiwan, South Korea and Japan. Ever since the war, those Governments have been consistently Right-wing in all their policies. They have pursued low public spending policies and have been consistently pro-enterprise. They have had education policies—this is important—very similar to the policies which are now belatedly being pursued by this Government. They have had extremely sound financial policies with low taxes. In all cases, they have had compliant trade unionists. Sometimes those trade unionists have been compliant by consent but sometimes they have been made compliant by other means which I would not support for one moment.
The other thing that those countries have in common is either low taxes or no taxes on savings, unlike Britain in the 1970s. I find it extraordinary that Labour Members should suddenly laud economies which have consistently pursued policies which this Government have broadly begun to pursue during the past nine years.
Our economy is undoubtedly not perfect. It has suffered from too-low interest rates, and the supply-side miracle that some people were talking about last year has not yet happened. However, we are on the right track to cure our supply-side problems. After all, our economy did not go into decline all of a sudden in the 1980s, the 70s or even the 60s. Our manufacturing industry has had problems for


about 100 years. Such deep structural problems cannot be cured in nine years. However, if we continue the policies that we have been pursuing during the past nine years, our supply-side problems will become a thing of the past. I sincerely hope that my right hon. Friend the Chancellor will hold firm on interest rates, because if he does, our inflationary problems will also become a thing of the past.

Mr. Doug Henderson: The Government have told us repeatedly—at least until the Prime Minister's address to this year's Conservative party conference—that the battle against inflation is the key economic target. They have also told us that, if inflation is not controlled, our economy cannot become competitive and British goods will be priced out of the world market. I do not disagree with the predicted consequence for our economy of a failure to control the rate of inflation.
However, where I do disagree—I believe that the majority of economic opinion in the country now disagrees also—is that I do not think that the Government can concentrate solely on one economic target. If the economy is to prosper, making our economy competitive means more than just giving consideration to the rate of inflation. Targets on industrial investment, on the amount of money which we as a community spend on training and on the amount of money that we spend on education, science and technology all affect the competitiveness of the British economy.
The Government have now been caught out after nine years. The months ahead will show that, because of their continued and sole preoccupation with the rate of inflation, they have failed not only to control that but to change other economic indicators. We have been told that, if we stick to the task of cutting inflation and if we take our medicine, things will work out in the longer term. We were also told—this is important—that only if we take our medicine and only if inflation is brought under control can things get better in the longer term and the economy prosper.
At this time, when statistical indicators show disturbing trends, the British people will be asking how the Government's record matches the claims that they have made consistently for nine years. It is easy to forget that against those claims the Government increased inflation from 8·3 per cent. in 1978 to 18 per cent. by 1980 following the imposition of the increased value added tax.

Mr. Morgan: And beyond.

Mr. Henderson: Indeed, as my hon. Friend says, they have increased inflation beyond even that amount.
The public will want to scrutinise the Government's record. They will want to know that, in the period 1981–85, our rate of inflation was consistently above the rates of comparable countries such as West Germany, the United States and Japan. They will also want to know that in the most recent period, 1985–88, when we have continually been told on television from the Tory party conference and elsewhere that the battle against inflation is being won, our rate of inflation has been appreciably higher than the OECD average. The public will also have heard that the

reason why the battle against the supposed inflation in Britain is being won is the specific and particular policy pursued by the Conservative Government.
The Chancellor should now recognise that it is not only Opposition Members who are saying that there are other reasons for a movement in the rate of price changes in the 1980s. People in the City now recognise that the reduction in the absolute level of inflation in the United Kingdom in the 1980s had very little to do with the specific economic policies of this Government, and far more to do with the movement in commodity prices throughout the world.
The people whom the Chancellor was addressing in his Mansion House speech last week will now be raising questions about the credibility of the Government's economic policy and asking whether they can have faith in a Chancellor who predicts in April in the Red Book that inflation will return to 4 per cent. in the fourth quarter of 1988. What will the City friends of the Chancellor and the Economic Secretary say about those forecasts? What evidence is there that anything that has happened in our economy in the six months since April relates in any way to the Red Book predictions of March?
Many of us would like to have as an associate a friendly fly on the walls of the Treasury. I wonder what those friendly flies would have been saying in the past six months during which they would probably have seen officials scurrying through the Treasury in alarm because of what is happening to the economy.
If the record on inflation over the past nine years has not been all that is claimed, the record over the past six months is disastrous compared with the predictions that were made in the Red Book. In April 1988, inflation in the United Kingdom was comparable to the level of inflation in the United States, although it was considerably higher than in France and West Germany. By August 1988—the latest date for which we have comparable figures—our inflation rate had risen to 5·7 per cent. We know that it increased to 5·9 per cent. in September, but even in August it was 25 per cent. higher than the rate of increase in the United States—more than double the rate of increase in France and five times that in Germany.
Over the years, Conservative Members have said that at least the Italians have a worse inflation rate than we have, but even that is not true now. On the August figures, Britain's inflation rate is increasing faster than Italy's. People in this country must now be saying, "If inflation is out of control, if the Government's stated targets on inflation have not been met and if inflation is the key indicator in the Government's economic strategy, what about the rest of the strategy? Can any of the Government's claims be met?"
There is great concern among the Government's Back Benchers, some of whom have been remarkably silent this evening. I hope that that concern shows itself later in the vote. Like the general public, Conservative Back Benchers were told that, unless we get inflation right, nothing else will happen to make the economy work. After 10 years of selling that medicine, those Conservative Back Benchers now face the prospect that, because inflation is not under control, there will be no recovery in the manufacturing sector and no additional provisions for the National Health Service or for social services. We cannot expect extra funds for training, education, science and technology. British goods will still be priced out—will be further priced out—of world markets. The promises of so-called free-market supply economics have not lived up


to expectation. I know that it will stick in the gullets of many Conservative Members, but September 1988 marked the return of stagflation to the British economy.

Mr. Barry Field: I add my tribute to the tributes already paid to my hon. Friend the Member for Kensington (Mr. Fishburn) on his excellent maiden speech. He fought the Isle of Wight on two occasions and came nearer than anyone to unseating my predecessor. It was obvious from the excellent way in which he presented the facts, and from his mastery of them, that he has not wasted his time in the journey from the Isle of Wight to Kensington. I know the affection in which he is still held in the Isle of Wight from his young days and his young campaign there, and I am sure that the people of Kensington will find him a worthy successor to a leading parliamentarian.
The spectacle of the Opposition parties lecturing us on sound economic management is about as plausible as Jack the Ripper giving a lecture on flower arranging to the Women's Institute. Speaker after speaker has mentioned the contraction of the manufacturing industry and the lack of investment. The hon. Member for Dunfermline, East (Mr. Brown) referred to it when he opened the debate for the Opposition, and the right hon. Member for Plymouth, Devonport (Dr. Owen) said that in his view manufacturing industry was pricing itself out of the market because of high interest rates. The facts clearly tell us otherwise. According to a National Economic Development Office report on the processing industries' investment forecasts for 1988 to 1992, the processing industries will be spending over £20 billion over the three years to the end of 1990. Even after netting out inflation, that is an increase in real terms of over 9 per cent. In anyone's language, that is a success story.
When my right hon. Friend the Member for Aylesbury (Mr. Raison) raised the question of child benefit and generously allowed me to intervene, the hon. Member for Cardiff, West (Mr. Morgan) was heard to remark that I was reading from my brief from the Whips' Office. I am sure that my hon. Friends in the Whips' Office will be pleased to know that they have been accused of producing such an erudite publication. In fact, I was reading from Hansard, 17 May 1988, column 419, where it is reported that over £1·3 billion is paid as child benefit to families with incomes in excess of £20,000.
I wish to direct my remarks, however, not to child benefit but to the children of this country. The Government are pursuing a policy that is far more valuable than child benefit: that of reduction and repayment of the national debt. Much has been made in today's debate of whether the Chancellor was wise to reduce the basic rate of tax to 40 per cent. The fact is that lower taxation has led to a much higher—indeed, a record—yield in revenue to the Treasury, coupled with a successful policy of privatisation in which more than 18 organisations have been taken from the cloying hand of the state and the public sector borrowing requirement and returned to the free-enterprise sector. I believe that the current Budget surplus is on target to reach £10 billion. In that context, no one could suggest that it was imprudent of the Chancellor to cut taxation.
It is not just in cutting taxation that the Chancellor has achieved such success. He is using that Budget surplus to

reduce the national debt, which will be of major benefit to our children and our children's children. We are the exception internationally. A recent report, published by James Capel, shows that the public debt as a proportion of gross domestic product has risen from 19 to 31 per cent. in the United States since 1979, from 15 to 26 per cent. in Japan and from 12 to 24 per cent. in West Germany. In Britain it has fallen from 46 per cent. to just under 40 per cent. That is the success of our Chancellor and of this Government's policy.
What a record that is: a reduced payment of interest on the national debt, allowing more money to be spent on the Health Service and our old people. That is our success, and that is the continuing programme of reform that the Government are pursuing. This will be of major benefit to generations to come. The Government are pursuing a long-term strategy for long-term problems, while the Opposition parties pursue short-term solutions for long-term problems.

Mr. Nigel Griffiths: The debate has been characterised by a somewhat dull and under-confident performance by the Chancellor, and by an unusually large number of timid speeches from his erstwhile supporters on the Conservative Benches. We suspect that that is because many of them now realise that, as our manufacturing, industrial and technological base shrinks in world terms we have a Government who back not the industrialist but the financier; not the producer but the property developer.
The business expansion scheme, the subject of so much lemming-like investment in recent days and weeks, is being targeted not at the industrial and commercial infrastructure—whose BES limit was set at half a million pounds—but at the old and faithful allies of the Chancellor's Conservative party: the property developers, who can raise 10 times that amount, courtesy of the Chancellor. While the property developers' problems are being addressed by the Chancellor, ordinary property owners with mortgages have been forced to swallow a bitter pill. Most first-time house buyers have seen their mortgages rocket in the past six months, so that even those who did not borrow up to the limit of their repayment power have found that their family finances are now at breaking point. Many families with mortgages have gone beyond breaking point. While the average budget gain was £12 a month, millions of home-owning families have seen their mortgage repayments spiral by more than £30 a month as interest rates soar to levels well above those of our European counterparts.
The Chancellor, however, seems unconcerned about the consequences: the record mortgage defaults, the record repossessions and the record rise in the number of homeless families. Those families are the victims of what the Chancellor calls competition—competition in a housing market that has seen average house prices double in eight years and in East Anglia and the south-east, including Greater London, rise by over 160 per cent. After the tax cuts, the benefit changes and those mortgage rises, two thirds of Britain faces a fall in living standards. Some 19 million households and families are now worse off, or certainly no better off, after the tax cuts that have been the source of so much smug satisfaction on the Conservative Benches; and for the 3 million families who are £15 or


more a month worse off, the Chancellor now seeks to freeze child benefit. That will affect 12 million children and 6 million mothers.
The hon. Member for Wyre Forest (Mr. Coombs), a staunch supporter of the Government, inadvertently admitted the folly of the freeze by accusing Opposition Members of damaging speculation. If the freeze is damaging, will he vote against any freeze in child benefit? We shall see. At least the right hon. Member for Aylesbury (Mr. Raison) is honest enough to admit openly what the Prime Minister sought to obscure today, last week and since the commitment on child benefit in the manifesto. He told us earlier that there has been serious back-tracking on what was said in the Conservative party manifesto. Why? To save £210 million now and to introduce targeting later, not so that just a few of the rich will lose child benefit, but so that many people on low incomes will also lose.
If the Government want evidence that targeting means cutting payments even to those who qualify for allowances, they need only examine the figures on family credit that they accepted earlier this year. The number of eligible families was assessed at 470,000, but, because this is a targeted benefit, less than half received the benefit and allowance. Last week, in a written answer, the Minister said that only 200,000 of the low-paid—of the estimated 470,000 eligible to claim—had claimed. The effect of child benefit targeting would be similar. We oppose the targeting of child benefit, not because it would not go to the rich, but because it would not reach the poor.
The freezing of child benefit will have an equally detrimental effect. For the 80,000 mothers and 160,000 children in Edinburgh, a freeze would mean less to spend on electricity to keep warm and less to pay towards the cost of rent and mortgage rises. In Edinburgh alone, the Government will save up to £10 million—money which would have helped mothers, children and the local economy. The child benefit freeze means a callous cut in the standard of living of Edinburgh mothers, as it does for families throughout the country.
The Chancellor has failed those families, harmed home owners and tenants and damaged our economy. Today he has failed to answer the grave charges of my hon. Friend the Member for Dunfermline, East (Mr. Brown), that inflation is higher now than in our competitor countries, that the damaging levels of imports are harmful to our economy, that the frighteningly high balance of payments defecit is out of control, that savings are falling and that we have a crippling level of interest rates. Like the Secretary of State for Social Security, the Chancellor has had his day. The sooner he goes, the better for all.

Mr. Tim Boswell: Virtually the only speech from the Opposition which has borne on the general management of the economy was the opening speech of the hon. Member for Dunfermline, East (Mr. Brown). He suitably set off at a Stakhanovite pace, making one promise of doom and disaster every minute. Unfortunately, after some 20 minutes, his hammer grew rather worn and, having emphasised the importance of investment, he omitted to mention the basic investment of his side which is in viable alternative policies, so his speech began to lose much of its impact.
Virtually everything else we have heard from Opposition Members has borne on the social condition of the nation, as was well instanced in the immediately preceding speech. Opposition Members have no monopoly on social concern and the condition of Britain. We, too, are concerned. To take the current debate about child benefit, if there were no inflation, we would need no debate about the level of child benefit and or its uprating because that would not arise.
The Opposition are silent on macro-economic policy because they have nothing to say about it. A much more relevant indicator of the basic strength of our economy is seen in our constituencies, in the overall figures for economic growth and in the little anecdotes and experiences that we encounter. To take up the remarks of my hon. Friend the Member for Wokingham (Mr. Redwood) on the motor industry, I was particularly impressed by a recent visit to a high-tech engineering firm where I saw a job being prepared in prototype. I asked who it was for and was told that it was for Porsche. I then asked what Porsche was doing making it here and was told that the Germans could not get it right so it had to be brought here. That shows the animal spirits to which Maynard Keynes referred, and that the idea that the British economy can succeed rather than always fail is being re-established. That is difficult for Opposition Members to handle and even for some Conservatives and the public, but it is something with which we must come to terms.
What a contrast that is with the 1960s and 1970s, when the economy seemed permanently in a state of crisis, when troubles came not in single spies but in battalions, and when everything was shaken up and changed every 10 minutes. I hope that the Opposition will give credit to the Chancellor and his immediate predecessor for this period of stable, calm, economic policy. We have had a whole series of problems, but we have been able to deal with them firmly, steadily, calmly and one at a time. I am referring to the financing of the Falklands war, our response to the almost overnight halving of the oil price and our response to the October crash last year.
It seems that the present problem with inflation lies in the commendable motives of the Chancellor in responding to the events of last October. He was worried that that might create a slide into a slump. Accordingly, there was some indulgence, as he has admitted. It was monetary, not fiscal, indulgence, but it was indulgence all the same and it has now had to be clawed back at some cost.
Our balance of payments deficit has one particular strength, in that, unlike the almost endemic position of the 1960s and 1970s, this deficit does not answer to a corresponding fiscal deficit in Government and public finances. We have privatised the deficit, and, just as we have privatised industry and seen the benefits of that, equally, when the deficit is in private hands, all those holding it, individually and severally, are responsive to market pressures.
A Government-led deficit is one where the Government can make their own terms and continue without responding to the situation. In those circumstances it seems inapposite to wish to raise taxes and to unpick the good work we have done on incentives. When one examines the underlying motives of the Opposition for wishing to raise taxes again, one sees that they have little to do with the benefit to the economy, but reflect the desire


of the former Labour Chancellor to squeeze the rich until the pips sqeak. That would give them pleasure, no matter what happened to the economy.

Mr. Morgan: The hon. Gentleman said that there had been some indulgence. Is he referring to the top rate tax cuts, and if not, why not?

Mr. Boswell: If I referred to indulgence, I would refer to the extremely regrettable phrases used by the previous Labour Chancellor and the luxuriance of Opposition Members in claiming a monopoly of social concern. I, too, am concerned—not least, because I am anxious about inflation.
It is entirely appropriate to operate on credit, for reasons which have not been adequately analysed. The first and most obvious reason is that an increase in interest rates chokes off excess demand on spending. The second and more subtle reason is that it tends to increase the interest rate and in doing so increases the competitive pressures on British industry. We must always remember that, for every 1 per cent of costs induced by a change in interest rates, there is some 4 per cent. increase in costs induced by a change in wage rates, with which industries can deal perfectly adequately alone. When industrialists come to me and complain, I tell them to look not at the mote in my eye but at the beam in theirs. Thirdly, an increase in interest rates helps to finance the deficit with which we must contend now.
I want to leave the Chancellor with two points for consideration. The first concerns public spending. There is a great endemic difficulty with spending Ministers. If things are going badly, they have a case for more money; if they are going well, they have a certain case for more money. I sometimes feel some sympathy with Treasury Ministers, who have to operate like the vice squad and hang around waiting for spending Ministers to do something. Sordid and difficult as that work may be, I ask them not to lose heart about it now. If there is to be extra spending for particular purposes, let us recover it elsewhere. Let us not indulge in excess spending which will bring back other problems.
Secondly, as some of my hon. Friends have said today, let us return to our main objective—tackling inflation. I do not share the view that the Government have given up, but I must regard their greatest achievements—admittedly at the time of the greatest problems—as having come in their early days. To confirm my confidence that the Government are prepared to meet and finally defeat this enemy, they will need to reduce average inflation over the period of this Parliament to a level below that which obtained in the previous one. As there is something of an increase now, there will need to be a commensurate reduction in subsequent years, with, I profoundly hope, a target of zero. That is the most urgent immediate action point for the Chancellor, who is handling the difficulties with calm and firmness. In doing that, there is no easy solution or free lunch—but equally, there is no other way.

Mr. Andrew Welsh: There is much to be said on this subject, but I shall be concise because of the limitation on time. It is significant that so many Scottish Members want to take part in the debate. The view from Scotland is very different from that advanced by the Chancellor and Conservative Members. It is very different

from the glowing report he gave of how well the economy is doing. The right hon. Gentleman is guilty of wanton complacency. So much can be seen by comparing his remarks with what is going on in Scotland.
I cannot be happy about the Scottish economy while Scotland is vulnerable to takeover bids by any outside predator who wants to come in. The Chancellor's response to my point, that the Government have the power now to prevent predatory takeovers such as the one aimed at Scottish and Newcastle Breweries, was incredible. He appeared to say that anything goes in such foreign takeover bids. I cannot believe that his response would have been the same to a foreign takeover bid for England's largest home-based manufacturing industry—yet this is the fate that awaits Scotland under this Government.
To judge from the Chancellor's remarks, we now have a Government committed to the creation of a branch factory economy, believing that to be a desirable economic goal. It is not, as Scotland knows to its cost. I again urge the Government to act in the Scottish and Newcastle affair before it is too late. If my advice is correct, Lord Young has powers under the Industry Act 1975 to stop the bid. In section 13, the Secretary of State for Trade and Industry has power to call the bid off if the takeover is
contrary to the interests of the United Kingdom, or … any substantial part of the United Kingdom".
Scottish and Newcastle Breweries employs more than 22,000 people. The company is the largest single Scottish-based manufacturer, and action is required now.
I cannot be happy about an economy in which high rates of unemployment are endemic and there is such tragic waste of human resources. The Government get unemployment down from an all-time record high that they created to a level higher than that which they inherited and call it a triumph. Some triumph. They do that by creating Mickey Mouse training schemes and altering the method of counting the unemployed. I know that statistical bases have to be reviewed—but 18 times in nine years? If the rules can be changed so easily, anything is possible. In his bunker in Berlin in 1945 Adolf Hitler might have proved that he had won the war. Unfortunately for him and the Government, they face the same problem: reality.
The reality in this country is that millions of people want to work but cannot. Scottish unemployment remains stubbornly far higher than that of similar small European countries, in spite of Scotland's having massive oil revenues and resources. Factories and whole industries are closed down: the motor car industry at Linwood, aluminium smelting at Invergordon and steel capacity at Gartcosh. Now Ravenscraig and the whole Scottish steel industry are under threat from the Government's economic policies.
This Government have created an economic revival based only in one area—London and the south-east. Life is different in Scotland and various parts of the United Kingdom. I want to get one message across to the Government about this so-called United Kingdom. I cannot be happy about the way in which basic industries are being destroyed and not replaced with new ones providing jobs to take Scotland into the future. I cannot be happy while our small businesses and industry are crippled by rates that will be made worse by the Government's uniform business rate proposals, which will be a disaster for the rural areas of Scotland if they are imposed, and for the whole of Scotland if they are not. What would


Conservative Members, who glorify high interest rates, do about agriculture in Scotland? It is burdened with debt; small and medium farmers face bankruptcy because of these high interest rates coming after a series of poor harvests.
Such economic mismanagement in the fifth richest oil-producing country in the world is almost incredible. It is a crazy mismanagement of the economy. If the Chancellor, to use his phrase, thinks the economy is overheating, he knows nothing about Scotland and cares even less. To speak of an overheating economy there or in other areas, such as the north-east of England, is a sick joke. We need Scottish solutions to a Scottish problem. We need to use our massive resources to create new jobs and industries to take Scotland into the 21st century. These the Government have failed, and are failing, to provide.
The Scottish National party seeks positive measures to get Scotland's economy on the move. We have outlined them clearly in policy documents and in Scottish budgets, explaining positively how the job can be done. The Government and the Chancellor have failed to deliver the economic goods for Scotland. They must be judged by that failure.

Mr. Rhodri Morgan: Most hon. Members who have been present for most of the debate realise that the key question we have been asking ourselves is: does a large balance of payments deficit really matter? The Chancellor has berated those who have said that Britain is in a balance of payments crisis, describing them as prisoners of the past. The hon. Member for Daventry (Mr. Boswell) repeated the phrase. He said that the trade deficit exists, but that it has been privatised, so it is up to the private sector to correct it with more self-discipline. I have news for the Chancellor: he is a prisoner of the past, and I shall explain why.
I was a civil servant in the Department of Trade and Industry in 1972 and 1973, during the first Barber boom. There were raging arguments between Treasury and Department of Trade and Industry civil servants on precisely the same issue: did the balance of payments deficit that we were running then really matter? The Treasury produced the wonderful argument that it did not matter, for the first time ever, because we had floated the pound, so it was up to the private sector to adjust, self-correct, and so on, because the pound would go down.

Mr. Boswell: Does the hon. Gentleman agree that at that time there was a considerable fiscal deficit on public finances, and in that respect it was different from the present position?

Mr. Morgan: Yes, I recall that there was a fiscal deficit; but the key point was that what the Treasury trendies were doing—and they are at it again now—was not making an objective judgment about whether the balance of payments deficit mattered, but finding an excuse for the balance of payments deficit that we were running.
If the Chancellor had thought when he made his Budget speech in March that it did not matter what size of balance of payments deficit we were running, he would not have said that he estimated that we would have a balance of payments deficit of £4 billion. He would have said that he

did not care what the deficit would be because it did not matter as it had been privatised. In fact, at the time he thought that the balance of payments deficit was manageable at £4 billion. Now that it is suddenly expanding from £4 billion to the latest estimate of £13·5 billion—perhaps the Economic Secretary can confirm that—the story has changed. That is why the Opposition are suspicious.
Why has the story changed? Have the Treasury civil servants been working overtime, as they did in 1972 and 1973, to look at the balance of payments deficit and find the best policy prescription for the next three or four years given the present position, or have they been looking for excuses again?
It is not only Opposition Members who are deeply sceptical about the story that the privatised balance of payments deficit does not matter a damn. We heard it before, 16 years ago. Analysts working in the City, people working in banks and those who look at this country from abroad are saying, "What is this wonderful Walt Disney story that they have come up with, that it does not matter if the emperor has no clothes or if there is a new Turin shroud that the Chancellor can surround himself with, saying that the privatised balance of payments deficit no longer matters?" Of course it matters. We are buying goods from abroad which, if we were in balance, we should buy from home. If we did the latter, there would be another couple of hundred thousand jobs in industry in this country.
Another important aspect of the balance of payments deficit is that, after nine and a half years of the present Government, we have the legacy of their getting worried about inflation. The banking, financing and investing community are getting worried about inflation and the Government have had to restate that inflation is their top priority now. Inflation must be borne down upon, not necessarily solved. The hon. Member for Wolverhampton, South-West (Mr. Budgen) made it clear that he did not think that it would be solved, and he is probably right, but it must be the top policy priority.
Before the Government came to power in 1979, there were those wonderful advertisements saying, "Labour isn't working." The Conservatives talked about giving trade unions back to their members when they spoke on party political broadcasts, or they talked about curbing trade union power when they addressed the Monday Club. They said that, by all those changes in social attitudes and getting people to work together, they could run an economy with reasonably stable prices and much lower unemployment than at that time, when it was 1·15 million. Now, all of a sudden, nine and a half years later, they have had to put inflation back at the top of the policy tree, not with unemployment at half a million or three quarters of a million, which is what the Conservative prospectus offered in 1979, but with unemployment at two and a half times that level.

Mr. Tim Janman: Can the hon. Gentleman recall a time when, under any Labour Government, controlling inflation and getting it under control was not top of the policy tree?

Mr. Morgan: The important thing is that the policy prospectus said that, one way or another, through social


and legal changes, it would be possible to solve inflation and have full employment, which was defined as a level of unemployment well below what it was in 1979.
This is the Phillips curve. I have not heard any Minister refer to it so far. There is a good reason for that: Ministers are deeply embarrassed about the state of that curve. The prospectus that the Conservatives sold to the British public in 1979 was that the Phillips curve—the trade-off position between low unemployment and reasonable inflation—would move to the left. In other words, unemployment would come down from 1·15 million to half a million or three quarters of a million. Instead, the Phillips curve has moved to the right. There is rapid wage inflation, which has nothing to do with the trade unions. It is largely in the self-employment sector, such as in the building industry, where labour is casual. That sector is characterised by phoney forms of self-employment. It is happening in the financial sector as well. That is where wage inflation is taking off. The Phillips curve, or the trade-off level between reasonable inflation and the lowest level of unemployment achievable, compatible with stable prices, has now shifted to the right, although the Conservatives said that they could successfully shift it to the left.
There is deep scepticism in the Opposition, the minor parties and, above all, throughout the country, particularly in the financial community. People are asking what the Government are playing at if, after nine and a half years in office, they are now in greater difficulties with higher unemployment and controlling wage inflation then when they came to office, despite having introduced innumerable anti-trade union laws. The Government have had all that time, with a comfortable majority, falls in commodity prices and the cushion provided by the oil prices, to make provision for social benefits and unemployment. Despite all that, nine and a half years later there is deep scepticism that the supply side miracle, far from working, has left us in the position where wage inflation is starting to take off and unemployment is still two and a half times what it was when the Government came to office. If that is success, I should like to know what failure is.

Mr. Janman: The hon. Gentleman referred to wage inflation. Is he aware that the general view is that the increases in wages—that does not necessarily equate with wage inflation—that are coming through in the private sector are being paid for by productivity increases? The problem is in the public sector where we have not had the correcting mechanism of reductions in head count, which should pay for the wage increases, nor have we had the productivity increases. Those public sector pay increases are directly related to public expenditure and the money supply as a whole.

Mr. Morgan: The hon. Gentleman should talk not to us, but to investment analysts and people in the financial community in the City to see whether he can persuade them of that.
Why is it that, in every speech, the Chancellor has to repeat the words that he used in the previous speech—otherwise the pound will fall and he will have to threaten to raise interest rates again? It is because people are so concerned that wage inflation is taking off. When that happens with unemployment at 2·5 million, that is bad news for a Government who promised in 1979 that wage inflation would not take off, even with unemployment well

below 1·15 million. That is a measure of the Government's failure over nine and a half years. Their only epitaph will be, "Excuse the mess: we've got the Conservatives in."

Mr. Kenneth Hind: It bodes ill for the Opposition to criticise the Government but to offer no solutions to our economic problems. At the last election, the Labour party said that it would increase public expenditure and lower interest rates. We argued in the House about the cost of those policies—about £34 billion. Such policies have proved to he the main cause of the problems that faced the United States Government 12 months ago and they had to take remedial action to deal with them.
The Opposition still do not accept that strong economies can produce good welfare systems and adequate standards of living. Because of their political philosophy, their bandwagon of ideas, the Opposition could never achieve what this Government have achieved. We should look, not just at the last six months, but at the last 10 years. The balance of payments problem is a problem of success, and so is the need to raise interest rates. The main factor in that success has been the supply side policy adopted by the Government. Seven years ago, 364 economists said that the Government's economic policy was wholly unacceptable and would not achieve anything. However, two economists disagreed and advocated a series of policies that we have pursued.
Our economy is highly successful. We have seen major reforms in the tax system that have created an atmosphere of enterprise, and there is greater investment by, and more money in the pockets of, our people. Eighteen companies have been privatised and there are nearly as many shareholders as there are trade unionists. The way things are going, there will soon be more shareholders than trade unionists. A major feature of Government policy is deregulation of prices, incomes, dividends, credit and foreign exchange. We have also seen the introduction of a competition policy in the public sector and a wider acceptance of freeing, through deregulation, competition in the private sector.
The Government's policy on trade unions has led to a reduction in the number of demarcation disputes in the private sector. It has also reduced the number of strikes and removed many of industry's industrial relations problems. My hon. Friend the Member for Thurrock (Mr. Janman) spoke about the improvement in productivity that has been created by the supply side policies of the Government. That is most important and has led to a successful economy.
We must look at the major successes. The profitability of companies is now 10·5 per cent., the best percentage for 20 years. The number in employment has risen by 2 million since 1983, and unemployment has fallen by nearly 1 million in the last two years. Living standards are at record levels because we have had nine years of sustained economic growth and record levels of investment in industry. Our share of world trade has levelled out for the first time this century and, if the Opposition look carefully at our level of world trade, they will see that it is slowly increasing. Those are not the problems of a failing economy.
Opposition Members should check in their constituencies on the number of new small businesses that have


registered for VAT. There are now over 1,000 such businesses registering each week. Those are the problems, not of failure, but of success. The Government have followed policies such as those followed by Japan, Singapore and South Korea. Opposition Members have praised those economies, but if they were in government they could not follow such policies because of the low public spending and the downward pressure of deregulation on the supply side policies of those Governments. Enterprise economies have stemmed from such policies. Opposition Members criticise the Government in the short term and do not look at the long term. They should recognise that much of what has been achieved could not have been achieved by the Labour party.
There are signs that the economy has been overheating and the Chancellor has had to take action. He accepts, as do all Conservative Members, that interest rates were allowed to fall too far. Higher interest rates are beginning slowly but surely to cool the economy. The most important contributor to inflation is the price of houses. However, a survey by the Royal Institution of Chartered Surveyors shows that in October house prices in the south-east are cooling. Over the next six months, inflation in housing will fall.
Opposition Members speak about the balance of payments, but they do not say that for many years there has been a need to expand the capacity of the economy. One of the successes of the economy is that it has been able to create record levels of profit, and that has led to investment in industry. Unfortunately, much of the profit has had to be used to buy capital equipment from abroad to increase the capacity that we need to improve the British economy. In the near future, that increased capacity will attack the problem of the balance of payments. A major problem will not arise, because the Government have a public sector surplus. If the Opposition were in power, that would not be the case. There will be no problem in financing the deficit, and the Chancellor is quite right to advocate that view.
The Government have never been deflected from their main aim of reducing inflation. Higher interest rates are directed at reducing inflation, the reduction of which has always been at the top of the tree, and we are seeing a high interest rate as a short-term measure to deal with the problem. Within 12 months there will be major improvements in the economy, and at that time the Opposition will be singing an entirely different tune.

Mr. Andrew Smith: It is a measure of the lack of inspiration that Conservative Members evidently derived from the Chancellor's speech that so few of them have bothered to stay for the whole of the debate. They are not queueing up to defend the Government's record. The hon. Member for Lancashire, West (Mr. Hind) gave a new slant to the doctrine of everything being for the best in the best of all possible worlds when he said that everything good that happens is a direct result of the Government's policies, while the bad things have nothing to do with the Government, but are all right anyway because they are the problems of success. He told us to look in our constituencies for that success. In my constituency the jobs

of 5,000 car workers are going precisely because of complacency and under-investment in the economy for which we attack the Government. Conservative Members have no answer to us other than to recite a dull litany of things that happened in the middle ages.
The Government have persistently under-invested in education, training, science and technology. If everything is on course, why have next year's grants for research councils been cut by 6 per cent.? Why is money not being spent on building up our science and technology infrastructure? Why has the manufacturing trade balance collapsed by £17 billion since 1979? It is plainly ludicrous for Conservative Members to continue to dismiss these things as the problems of success. They are not the problems of success. They are the evidence of failure.
We are told that no improvement in the balance of payments can be expected until well into the 1990s. That means 20 or so more months of appalling trade figures. This is no temporary blip as the Chancellor would have us believe. It is a return to the bad, old-fashioned stop cycle of the stop-go economic policies which were so discredited in the past.
We have pathetically low capital investment in manufacturing, which is still less than it was when the Government came to office, and barely 3 per cent. higher than it was during the deep recession of 1980. Some Conservative Members have vaunted high interest rates as the solution to all our problems. What will be their effect on the welcome but none the less limited recovery in capital investment during the past 12 months? They threaten to stop it dead in its tracks.
The high interest rate regime is a double-edged sword in the control of inflation. The hon. Member for Eastbourne (Mr. Gow) said that he agreed with the Chancellor, he agreed with the hon. Member for Wolverhampton South-West (Mr. Budgen) and he agreed with himself, that high interest rates would reduce inflation eventually. At what cost? How many more jobs will go unnecessarily through the deliberate choice of this crude weapon as a means of attempting to bring down inflation? Workers with any sort of bargaining position—there are plenty of them—will exert it to recoup the cost of higher mortgage repayments. The 9·2 per cent. rise in average earnings and the high rewards offered to some skilled workers in the south demonstrate the scope for that possibility.
Higher interest rates are intended to reduce demand, but any such reduction will be revealed in lower domestic production, whereupon we shall have higher unit costs and falling productivity. The only thing that can rescue the Government from the lower productivity and wage inflation caused by high interest rates is a switch from domestic to export production, but the dismal balance of payments figures that I mentioned offer no evidence of any hope that the Government have done anything like enough to restore Britain's international competitiveness to make that a reasonable or viable strategy. The consequence of the high interest rate anti-inflation strategy will be inflation in the short term. Putting prices up is a curious way in which to bring prices down.
Conservative Members have not considered the mismatch between demand for and the supply of labour in different parts of the country. It is as absurd as it is callous that overheating in parts of the south has been allowed to coexist with continuing recession in many other parts of the country. The Government are directly responsible for that. They deliberately reject regional policy. They have


cut regional grants by £700 million since 1979. For the south, they reject any housing policy that could secure some decent low-cost accommodation, thus contributing to a ludicrous price spiral for housing.
We have the obscenity of rapidly increasing house prices, a doubling of homelessness and slashed public housing. Far from doing anything to redress the imbalance, the Chancellor aggravated it in this year's Budget by channelling tax cuts to the wealthiest people in the south-east at the expense of the rest of society. It is little wonder, therefore, that there is escalating development pressure in the south-east, which imposes even more strain on our roads and other transport network and green belt than it does on the political credibility of the Secretary of State for the Environment.
Confronted by those constraints and the Government's inability to do anything about them, it is no wonder that Conservative Members have been so dull and unimaginative in their defence of the Chancellor's dull and unimaginative speech. At the Mansion House last week he said that the supply side revolution had been accomplished, but that much vaunted revolution has simply not materialised. We have witnessed an old-fashioned short-term consumer boom, which will be followed by an old-fashioned short-term economic stop.
One aspect of the debate has not received much attention today. It is what sort of economic growth we are talking about. In a fine maiden speech, the hon. Member for Kensington (Mr. Fishburn) rightly referred to the importance of economic growth and its contribution to society. In debates such as this the House should consider what sort of growth we are talking about. It is high time that we challenged some of the outmoded indicators that are taken for granted as measures of economic achievement.
We cannot go on—the public do not want us to do it—including the production of pollutants as a positive economic output. It is counted in the Government's statistics as a good thing, but expenditure on cleaning up the beaches, which falls to the public sector, is counted as bad because the Government define public expenditure as bad. Nor can we continue to allow the manufacturer who produces five widgets and a lot of pollution to retain a competitive advantage over one who produces, at the same cost, four widgets and no pollution. If any credibility is to be attached to the Prime Minister's green conversion on the road to Brighton this year, we must look to the Government to come forward with proposals that put the cost on pollution. At present that is not reflected in market prices. There should be a tax on pollution, as well as regulations.
The Labour party recognises the contribution made by the market and competition to effective economic performance, but we also recognise what many Conservative Members have yet to learn, that economic performance embraces and is determined by a great deal more than that which the market can measure or that free enterprise can deal with.
The dead seals washed up on our shores, the hole in the ozone layer and the greenhouse effect are not reflected in market prices until it is too late. The market failures in the transport crisis that is evidently affecting the south will not be solved by further applications of the same free-for-all philosophy that clogged things up in the first place.
When it comes to pollution control and environmental protection—as with health, training, education and

housing—the market, left to its own devices, messes things up. Moreover, it messes things up worst for people who have been denied the wealth that Conservative Members have so shamelessly channelled to the few. It messes things up and imposes the worst environment, just as it imposes the worst standard of living on the people who most need the increases in child benefit which the Chancellor and the Prime Minister seem determined to resist.
As people increasingly recognise the values of collective action, democratic planning and a sense of equity, which seem to have deserted the wilder idealogues on the Conservative Benches, and realise that we need to act together for a better and more just world for the future, and that we need to act in the interests of the whole community and not simply the smallest, richest part of that community, they will turn to a party which embodies those decent values and which can put them into practice in a way which the Government plainly have not, cannot and will not. The Labour party will.

Mr. Alistair Darling: Two interesting features of the debate deserve comment. First, the Conservative Back-Bench attack, which appears to be petering out, failed to make any impression on the excellent speech of my hon. Friend the Member For Dunfermline, East (Mr. Brown). Perhaps the most notable failure was the Chancellor himself, who is clearly past his best. Secondly, the Conservative Back Benchers painted pictures of their constituencies that I suspect most of their constituents would not recognise.
People are always astonished at how the Government manage to wash their hands of anything that seems to go wrong, as my hon. Friend the Member for Oxford, East (Mr. Smith) said. Whenever something is wrong, it is nothing to do with the Government; it is the fault of the market. High interest rates, crippling industry and increasing burdens on home owners are blamed on the market, yet they are a consequence of the Government's tax cuts earlier this year.
As the debate draws to a conclusion, we should examine the role of the market. Nowhere is the Government's view on the economy more clear than in the Department of Trade and Industry paper, "Mergers Policy", which asserts that public interest in employment, regional economic development and research and development does not typically diverge
from the interests of private sector decision-makers
That is nonsense. We know that public and private interest are often diametrically opposed, and nowhere has that been more clearly illustrated than recently in the case of Barlow Clowes. Did it have the public interest at heart? It had nothing but heart for its own pockets. In many cases the market seeks to reward those who want to look after themselves first. The market does have a role, but we do not want to live in a society in which we have to work For the market rather than the market being simply an instrument for regulating certain aspects of society.
I mention merger policy because in my constituency it is of the greatest importance at the moment. We are dealing with the takeover of Scottish and Newcastle Breweries by Elders, an Australian-based company. It is not an issue just for my constituency in Edinburgh; it is a Scottish matter and an issue for the whole of the north of Britain and for the United Kingdom.

Mrs. Margaret Ewing: Will the hon. Gentleman give way?

Mr. Darling: With respect, I shall not give way to the hon. Lady as time is short and a number of hon. Members have been waiting for some time.

Mrs. Ewing: rose

Mr. Darling: As the hon. Lady is on her feet, I shall comment on one point raised by the hon. Member for Angus, East (Mr. Welsh). He said that the Government would not have allowed it to happen to an English beer company. That is a little blinkered, because the Government were none too keen to help Rowntree, which is certainly an English company. This issue illustrates the difference in philosophy between the Conservative party and the Opposition.
I shall depart from that for a moment and deal with the morality of the market place which is important in relation to the Scottish and Newcastle takeover bid. Promises have been made—in many cases glibly—that are reminiscent of the promises made in the case of the Guinness takeover of Distillers. It is interesting that Guinness said that it was nothing to do with the Government. Guinness also said, "It was nothing to do with us; it was all the fault of Mr. Saunders. Mr. Saunders is being dealt with by the courts. Therefore, it is nothing to do with us." But it is a problem for the Government and for Guinness. Guinness broke its word: it has done nothing meaningful to bring its head office to Edinburgh. It is no wonder that those of us in Scotland doubt the promises being made by Elders, by Mr. Elliot, and, sadly, by my predecessor, who is prepared to sell himself to just about anybody prepared to offer the right price, that Elders is willing to set up its headquarters in Edinburgh.
In The Canberra Times of 20 October, I read a statement by the managing director of the Elders-owned Carlton United Breweries reassuring Australians that Fosters would not become MacFosters. It said that management of the other breweries within Elders would stay in their home country. Is it any wonder that we are sceptical? What happens in the market place is that promises are made here, there and everywhere to suit the listener at the time. We are not impressed by the promises, and today's formal announcement of the takeover bid convinces us more than ever that the bid has to be referred to the Monopolies and Mergers Commission.
There is more to it, because referral is only the first stage. The DTI's mergers policy document is very much concerned with the short term, with here and now and the interests of private industry first and foremost. Nowhere does it cater for the public interest. Paragraph 2·2 states that some people consider that the spate of takeovers in this country
encourages short term thinking and distracts incumbent managements from their real job of running their companies.
How true that is. Observing on the research that has been done, it states:
The bulk of the evidence is that the commercial performance of enterprises post-merger has, more often than not, failed to live up to the claims of the acquiring firm at the time of merger.
That is illustrated in the proposed Elders takeover of Scottish and Newcastle. Wild claims are being made about a company that is well established and has flourished outside the south-east of England and that it should be supported because of that. Elders says that it can produce

a fast return because it is interested in a fast buck. It has no long-term commitment to the United Kingdom, let alone Scotland. It is there to make money. It will stitch up the deal and then go on to make some other deal in another part of the world.
The Government take the view that private and public interests really have no difference. That is absolute nonsense. The document also makes some comments about asset stripping. Hon. Members will be aware that one of our concerns is that Elders will asset-strip Scottish and Newcastle. It has said that it will sell off the hotels and the pubs, just as British Aerospace is selling off the Royal Ordnance factories. We have come to expect such things, yet in the document the Government say:
Some observers see such post-merger divestment as inherently destructive and apply the pejorative label 'asset-stripping' to it.
Asset stripping is asset stripping and cannot be called anything else. To call it "post-merger disinvestment" is to use a fancy form of words for something wholly destructive and distasteful. The Government's presumption that all it is doing is putting resources to a more efficient and profitable use and that somehow it will benefit the economy as a whole is the highest nonsense, and I suspect that most Conservative Members know it.
Scottish and Newcastle is one of the largest manufacturing companies in Scotland. It is likely to fall prey to Elders unless the Government are prepared to add some strength to the statement that is often piously made from the Scottish Office, that they are interested in Scottish-based companies remaining there and exercising control and decision-making, which is crucial. At the moment, although encouraging noises have been made by the Scottish Office, the Government's national policy flies in the face of all that. Their policy is that the free market rules and nothing ought to stand in its way. Edinburgh, Scotland and the north of England will lose out if the takeover bid goes ahead.
I hope that, when the Chancellor of the Duchy replies, he will accept that the Government's merger policy does not work because it leaves large parts of our economy exposed to creditors who will use the assets, sell them and move on elsewhere. Those companies would treat our well-established companies as doormats in order to get into the European market. I hope that the Government will accept that public interest is paramount. It should be incumbent on those who take over or merge with companies to establish that that is in the public interest. Elders should show that Edinburgh, Scotland and brewing within the United Kingdom will benefit, rather than someone's bank balance elsewhere in the world.
Too often glib promises have been made, dressed up in glossy leaflets and presented by flash advisers, who seem to flourish under this Government. Some have enjoyed public patronage. Some of these people are making rash promises that they have no intention of honouring. Indeed, they are incapable of doing so. The vast majority of our people have been left on the side lines. Their interests have not been represented by the Government. The Government mutter platitudes but do nothing to help those interested in this country's long-term economic development.
The true test of any Government is their legacy. This Government's legacy is a sorry one. They will leave a country pillaged by predators—people interested only in short-term gains who care and know little about the


companies with which they deal. The Government have acted as estate agents. They will sell anything they can and reap the benefits. The losers will be the people.

Mr. Tim Janman: The speech of the hon. Member for Edinburgh, Central (Mr. Darling) was saddening. His simplistic view of the way in which the market works—equating the whole capitalist economy in Britain with one company which broke the law and which is taking investors for a ride—was not worthy of the House. It was a slur on the millions of managers, executives and owners of small, medium and large businesses who create the wealth that the hon. Gentleman's colleagues are only too eager to spend.
The hon. Member for Oxford, East (Mr. Smith) seemed to think that the steady growth in the economy is limited to the south-east corner. I went to the midlands twice last week and it was a delight to see the arteries of capitalism pumping so enthusiastically at the motor show. I asked the managers and industrialists running the stands to compare the mood of confidence in the motor industry and in industry as a whole now with what happened in the mid and late 1970s, when we all suffered under the dead hand of bureaucratic Socialism. It was marvellous to hear them say how the environment had changed. It has taken a long time, but the environment has been turned round. It will go from strength to strength.
Everything is not perfect. We have not reduced public expenditure as much as we should have done and there is still far too much regulation, especially in the labour market. Wage councils, equal pay legislation and race relations legislation are all unnecessary evils with which the economy must contend. They prevent efficient utilisation of economic resources, particularly in the all important sphere of the labour market.
There have been many advances since 1979. Just over a decade ago, this country was heavily in debt. There was the appalling time when we had to be rescued by the IMF. We are now paying off our debt. Money that could be spent on essential social services, health and education is no longer spent on paying off debt interest.
A decade ago, under the Labour Government, there was a huge public sector borrowing requirement. As always, a Socialist Government were trying to spend more money than the country was earning. That was not surprising, given their policies which always strangle the economy's ability to create wealth. We now have a balanced Budget for the first time since 1969. Indeed, we are probably running at a surplus—another great achievement.
Personal taxation has been reduced. One Opposition Member bemoaned the fact that the top rate of income tax has been cut. His policies on taxation are sour, based on envy and downright stupidity. The revenue to the Treasury from the top 5 per cent. of income earners is increasing, which means that more revenue is available to my right hon. Friend the Chancellor.

Mrs. Margaret Ewing: Does the hon. Gentleman believe that that revenue should be spent on child benefit?

Mr. Janman: It should be spent on child benefit targeted on those in real need and should not be wasted on the present universal system.
My hon. Friend the Member for Lancashire, West (Mr. Hind) said that productivity has been increasing year on year.

Dr. John Reid: Will the hon. Gentleman give way?

Mr. Janman: I shall not give way, because of the time.
Productivity, not output, is the important measure. Any fool can make something. Any fool can make a lot of something. What is important is whether the product is of such a cost and of such a quality that the customer wants to buy it. Perhaps if Leyland in Oxford had done that, it would have been in the same position as Nissan in Washington and Ford in Bridgend. Because Leyland did not, it now has problems.
Even manufacturing output is at record levels, and increasing. We are all pleased that that is happening. Expenditure on the NHS and education is much higher in real terms than in 1979. A Labour Government cut nurses' pay. A Labour Chancellor said that nurses were not productive. A Labour Government cut the capital spending budget of the NHS by one third and closed scores of hospitals.
There is now record profitability. Labour Members may scorn it, but that profitability is the means by which industry, through the taxation system, contributes to public expenditure and to increased spending on social services, health and education. If that profitability did not exist, we would not be able to make those advances.
Since 1979, there has been a huge extension of consumer choice, with nationalised industries returned, rightly, to the private sector, with thousands of new businesses starting every week and with record levels of private sector investment. That is another healthy sign that the economy is sound and is continuing to improve.
Inflation is 5·9 per cent. too high and should be reduced to zero as soon as possible. It is vital that the good work done over the past nine years and the aims of the excellent 1981 Budget are not thrown out of the window. It is vital that we continue to keep a firm grip on public expenditure and continue to reduce public expenditure as a percentage of GNP. Individuals and individual businesses can spend far more wisely than politicians and bureaucrats in Whitehall.
More deregulation, especially in the labour market, is needed. We need aggressively to pursue our policy of denationalisation—I prefer that term to the American-sounding "privatisation"—and competition. The Government must not forget that the 1979 Convervative party manifesto referred not to a policy of denationalisation but to competition policy. When returning industries to the private sector, it is vital that we ensure that we also have increased competition and consumer choice.
Those fundamentals—returning industry to the private sector, enhancing competition, increasing consumer choice, controlling public expenditure and ensuring that inflation is kept under control—have been the ingredients of our success in the past nine years, and it is essential to keep to them in the future.

Mr. John Battle: I am sure that some Conservative Members in preparing for their return to the House will at least have glanced at the Sunday Telegraph colour supplement of 16 October which featured
The Cabinet in the Year 2000
with a large colour photograph of the current Chief Secretary as the future Prime Minister surrounded by his new Cabinet.
The Chief Secretary has been absent for most of this debate, but we are entitled to ask the proposed future Prime Minister to spell out whether he still believes that the young and the elderly in our society should be supported by contributions from general taxation or whether he favours phasing out child benefit and pensions. About 2·5 million children—a fifth of all children in our society—are living in families on less than half the average income for the year 1985. In the light of those figures, which are accepted by the Government, does the Chief Secretary stand by his statement in the journal Poverty in the spring of 1987? Three months before the general election, he defended child benefit as follows:
I can tell you that child benefit will continue as a non means tested universal payment, paid to the mother and tax free. There ought to be no question about that.
That statement says nothing about targeting the benefit on those in need or about means testing it. We need to know whether the Chief Secretary still stands by that statement or whether he says one thing one day but does something different when it comes to setting the Budget. Can he reassure us that he has been actively resisting the Prime Minister's view that child benefit should effectively be phased out? Can he assure the 6 million families involved that they will not lose child benefit in the future? Or will he be telling half a million families with a million dependent children that they will soon be shifted to means-tested benefits?
In case anyone still believes that the Chief Secretary is a stout defender of the principle of supporting the poor in society from general taxation, perhaps the right hon. Gentleman will clarify his letter of 20 January 1986 advising the then Member for Taunton to tell a constituent that he is
expected to exhaust his savings, look to his friends, relatives, existing bank or credit facilities, before seeking a loan from public funds.
The language is revealing. Behind it lies the withdrawal of the welfare state. Is that still the right hon. Gentleman's attitude? Is the Government's attitude that the poor in society should look after themselves and expect their families and friends to be responsible for them? How does the Chief Secretary justify the advice in that letter, in view of the policy of keeping interest rates high so that those in need cannot afford to borrow without incurring huge debts?
That hard view of self-help for the young and the elderly is being firmly translated into Government policy by the Chief Secretary, supported by his hon. Friend the Member for Wokingham (Mr. Redwood) whom the Sunday Telegraph shows sitting alongside the proposed Prime Minister as Secretary of State for Social Security. What are we to expect from him? There is a clue in a feature that he wrote for The Guardian, in which he says:
An elderly woman finds managing on her pension and housing benefit difficult. She seeks additional help. Should her son step in if he is earning £30,000 in a good job? What if her

son is a millionaire? What if she has chosen to collect old furniture or watercolours and has many thousands of pounds invested in them?
Is that the reply that the future Secretary of State for Social Security intends to give to the 10 million people over pensionable age who form 18 per cent. of our population? Will they be told to sell their furniture and watercolours?

Mr. Redwood: I am delighted to hear the hon. Gentleman concede that the Conservatives will still be in power in the year 2000—on today's evidence, I am sure that we shall be—but is he really suggesting that we should have a welfare system that helps the millionaire?

Mr. Battle: The concession was that of the Sunday Telegraph—it is certainly not mine. If the hon. Gentleman's only response is that pensioners are living well, he should consider the fact that the majority depend on social security for 48 per cent. of their income. The hon. Gentleman was uncharitably described by the Sunday Telegraph as a
desiccated Tory calculating machine".
I apologise on behalf of the Sunday Telegraph for that insult to the hon. Gentleman, but he should take the facts and figures into account before suggesting as a hallmark of social security policy the idea that pensioners should sell their furniture or their watercolours.
It seems that the Government intend to persist in divorcing the protection of the young and the elderly from the economy and in particular from the tax system. Will the Chief Secretary persist in telling the present Secretary of State for Social Security that there can be no uprating of child benefit and that there must be further cuts in housing benefit, which will hit pensioners hardest? Will he be telling his right hon. Friend that he has no intention of revising the inflation estimates upwards from 4·5 per cent. to 6 per cent. for the uprating of benefits? Will he echo the hon. Member for Isle of Wight (Mr. Field) who said that repaying the national debt was far more important than child benefit and pensions? Are the poor to be downgraded, pushed into the margins and out of the main economic text and made invisible on the ground that the Government regard poverty as a statistical fiction?
The Government talk about improving incentives for the rich. The Government are addicted to a mechanistic view of the economy, adulating the market and the price mechanism, elevating the concept that "the price is right" as the supreme generator of wealth and uncritically worshipping the free market on the basis of an arithmetical equation and running the Treasury on a distribution method computed only by averages.
The hon. Member for Wolverhampton, South-West (Mr. Budgen) expressed his concern for social cohesion in our society. I commend to him the following statement by writer Gregory Baum in an article entitled "Victims in the Affluent Society":
A society that allows its institutions to produce such a gravely unjust distribution of wealth and power will generate a humanly restrictive culture, a culture that makes the victims invisible, that makes preoccupation with one's own success morally respectable, that reconciles people with social inequality, that persuades people that there is no humane alternative to capitalism, and that blesses the increasingly coercive measures necessary to preserve the social peace.
At the end of the day, although the Government herald the fact that the living standards of the majority in Britain may be rising, they are blind to the reality that a quarter


of our society is living on or below the margins of poverty—15·4 million people are paying the price for the Chancellor's great economic experiment.
The current public spending round is widely recognised as a crucial test of whether the Government have any intention of giving the poor a further share in the much vaunted growing prosperity. That will be measured in the benefits level statement later this week and in the Autumn Statement. It will be on the basis of the Government's contribution to date that the country will pass its judgment on the Chancellor's handling of the economy.

9 pm

Mr. Christopher Gill: I am happy to support the Government amendment because, without question, during my adult life this is the best Government that this country has had. [Laughter.] For the benefit of those Opposition Members who laugh, I shall explain why. It is the best Government because of the success of their economic policies. It is a non-interventionist Government, and I cannot overstate the importance of that.
The modest success that I have achieved in business over 30 years has been largely due to hard work and determination; it has had nothing to do with any assistance from the state. In fact, I might almost say that such modest success as I have achieved has been in spite of rather than because of the Government. They are the best Government because they have encouraged enterprise, which has led to greater productivity, healthier profits and greater prosperity for millions of people.
Such problems as we have are more those of success than of failure. If it is perceived that there is an excess of private spending, it is because of the new-found confidence of our society. I must tell my right hon. Friend the Minister that I regard it as one of our priority tasks that he and I, as individuals, persuade the population to follow the Government's example in exercising thrift—[Interruption.] I know that the truth is painful to the Opposition, but the fact is that we are balancing our budget, we are repaying debt and we are living within our means. I have great confidence in my right hon. Friend the Chancellor—confidence that is shared by many of my colleagues and his right hon. Friends. I am satisfied that the single lever of fiscal control that he allows himself, in in the shape of interest rates, is quite satisfactory.
I wish to make a suggestion, in two parts, to my right hon. Friend. It is an unorthodox suggestion—indeed, even a radical suggestion. However, this Government are a radical Government, and I venture to suggest that, while the Conservative party remains the radical party of British politics, it will continue to form the Administration for many years to come. I urge my right hon. Friend in his next Budget to give priority not to reducing income tax rates but to industry and the low-paid. That is something for everybody, one might say.
I want to see my right hon. Friend the Chancellor help manufacturing industry. He will be more aware than any of us of the amount that manufacturing industry currently contributes to the Exchequer in the form of pay-as-you-earn and national insurance. I want to see him reduce the burden of tax on the low-paid.
I want to see successful manufacturing industries retain more of the profits that they make, so that they can finance training and research and development, which many hon. Members have spoken about tonight. I want to see

industry financing its own investment. All of that would be to the great benefit of employment and commercial prospects and to the future of our great nation. I shall say, before my right hon. Friend the Chancellor says it, that we already have one of the lowest rates of corporation tax in the world. However, even lower rates would make us even more competitive in the world and we would be even more successful in producing in our factories in the United Kingdom more of what we consume.
The other part of my proposition concerns those who move off the unemployment register into low-paid employment. There should be a neutral zone in which such people are not penalised by tax and national insurance which, for people who earn two thirds of the national average wage, amount on average to something over 20 per cent. of their earnings.
Those two propositions—reducing the burden of tax on industry and on the low-paid—are more important than reducing the basic rate of taxation. I am sure that there will be agreement by hon. Members of all parties that ihe better-off members of society have benefited considerably from the alterations in tax rates in the Budget. Let us, in the next Budget, help manufacturing industry and the low-paid. The dividends from that would be enormous in social, economic and—dare I suggest to Conservative colleagues—in political terms as well.

Mr. Tony Worthington: The problem during the debate has been one of people inhabiting different worlds. I have found it extremely difficult to recognise the world that has been described from the Government Benches. In the west of Scotland, we have lost 200,000 jobs since the Government have been in power. We continue to have an unemployment level of about 19 per cent., 42 per cent. of manufacturing jobs have disappeared in that time, and about one third of the population are officially classified as living at poverty level.
Now we find that we are entering a "temporary blip"—a cooling down of the economy—which means that, if there were a ripple effect from the south of England, it would not now reach Scotland. That is the meaning of the Chancellor's speech today. Those less prosperous parts of the country will continue to be less prosperous. The Government must abandon the pretence that private sector leadership will come in to deal with those less prosperous parts of the country.
We read nonsense written by organisations such as the Confederation of British Industry, which says:
Business must provide the leadership and vision to reverse the cycle of economic and social decline
in those areas. There is not the slightest chance of that. If there were, why has it not happened already? Private business has, legitimately, one interest—to make a profit. If profit were there and visible, private business would be there already. There must be leadership by the public sector and state intervention. The Government know that, but they have not the honesty to admit that there must be such public sector leadership.
Experiments such as the enterprise zone experiment show us that. When the Foreign Secretary, as Chancellor of the Exchequer, first thought of enterprise zones, they were portrayed as examples of the free market economy—completely free of planning permission or any other controls. Such experiments have been a miserable failure. The enterprise zones that have had some success have been


precisely those that have been tried alongside agencies such as the Scottish Development Agency, which has invested considerable sums of public money.
In Scotland, we are often told about the role of enterprise trusts. We are told that they are the agencies of private business—Scottish business in the community. If a business wants to become involved in the community, we welcome that involvement. However, I have been examining the developing role of enterprise trusts in Scotland. It does not matter which trust one considers. All of them are funded essentially by central and local government. They are publicly funded agencies.
ASSET—the Ardrossan, Saltcoats and Stevenston Enterprise Trust—is funded by the Scottish Development Agency, Irvine development corporation, Strathclyde regional council and Cunninghame district council. Consider, too, the Greater Easterhouse initiative. That is funded by the Scottish Development Department, the SDA, Glasgow district council, Strathclyde regional council and the Greater Easterhouse partnership. In every case, the trusts are dominated by the public sector, which has to provide a framework and leadership for private industry to become involved. We need to recognise that it is state intervention that will lead to success.
I shall quote the words of a man in the investment world whom I respect; I worked alongside him in my previous existence in Strathclyde. Graeme Knox is the managing director of the Scottish Amicable Life Assurance Society. The thing about Graeme Knox is that he is honest about investment. In an interview in the present edition of Scottish Business Insider, he was asked a question that he has been asked many times: does he take into account the fact that there should be investment in Scotland? For Scotland, one could substitute Wales or the north-east. He says:
Scottishness is not a factor in investment decisions … Personally, I am as parochial as the next Scot, but we are a British company operating worldwide. The best way that we can serve Scotland is by being successful. To syphon sums of money into inferior returns is the way to death.
Graeme Knox also says that Scottish Amicable has to compete with other investment houses because if it does not achieve a return on the money, new funds will not come to it. It is perfectly legitimate for Scottish Amicable to say that.
I hark back to the words of my hon. Friend the Member for Edinburgh, Central (Mr. Darling). There is a division between private and public interest. We are experiencing the consequence of the investment decisions of Graeme Knox and the managers of all the other finance houses: 47 per cent. of construction is now taking place in the south-east of England; the business expansion scheme is concentrated in the south-east; venture capital is concentrated in the south-east.
The limit to Graeme Knox's remarks is that Scottish Amicable can survive in a desert: it can survive and prosper amid mass unemployment, and it does not need to be in Glasgow at all. Scottish Amicable does not even need to exist in its present form to prosper. It may be taken over by another company and it will thrive, but what will happen to those who are left behind? That is the point that the Government are missing. We need public sector leaders.
We must have much more of an interventionist policy. The latest example is that of the Scottish and Newcastle Breweries takeover, to which my hon. Friend the Member for Edinburgh, Central (Mr. Darling) referred. If one had to find one reason why the Tories are doing so badly in Scotland, one need only point to the behaviour of two previous Conservative Members of Parliament, Sir Alex Fletcher, acting directly for Elders IXL, and Mrs. Anna McCurley, acting for John Courage Ltd. What one hears is the disgusting clink of 30 pieces of silver—[Interruption.] What is being revealed is that, if people will pay the money, some will take it and hang the consequences.

Mr. Bryan Gould: I begin by adding my congratulations to those that have already been offered to the hon. Member for Kensington (Mr. Fishburn), who impressed the House with an excellent maiden speech. He spoke eloquently and without notes, and, I thought, with a hint of independent thought that may make him worth listening to on future occasions.
We have had such an excellent debate that it fully vindicates the decision by the Labour party to hold this debate today. The theme, perhaps surprisingly, has been the Chancellor of the Exchequer. The plot has been the story of how the miracle worker of March has become the apologist of October. The Chancellor has become an apologist for an economic policy that has brought the economy teetering to the brink of soaring inflation, of dizzying trade deficits and of rising unemployment.
Not surprisingly, the Chancellor has been denounced by Opposition Members, and for very good reason.

Mrs. Margaret Ewing: He is not here.

Mr. Gould: As the hon. Lady says, the Chancellor was not here to hear that denunciation in its entirety.
The debate was interesting because of the hints of disquiet that appeared in almost every speech from Conservative Members. We heard those hints of disquiet, for example, from the hon. Members for Eastbourne (Mr. Gow) and for Thurrock (Mr. Janman). A perhaps plainer statement of anxiety was delivered by the hon. Member for Wolverhampton, South-West (Mr. Budgen). Of course, from outside the Chamber, we have heard veritable blasts of criticism from the right hon. Members for Chesham and Amersham (Sir I. Gilmore), and for Old Bexley and Sidcup (Mr. Heath).
I am glad to see that the Chancellor has arrived in the Chamber in time to be commended for the fact that, perhaps uniquely on this occasion, he has admitted to a little misjudgment. It was a confession of error that was made grudgingly. It was a confession of error which—when he was challenged to repeat it—he partially withdrew, but nevertheless, a confession of error it was. From the lips of the Chancellor, that is a minor miracle of modern politics.
The charge against the Chancellor is simply that he has lost control of the economy, because first he engineered a pre-election boom, and then, as he confessed, he misjudged the consequences of the October stock market crash and therefore presided over a credit explosion. I am a little chary about using that phrase, because the unwary might assume that there may be something vaguely meritorious about a credit explosion. Perhaps a better phrase would be


that he presided over a borrowing binge, which has stoked up asset inflation and has persuaded people that their assets, which are appreciating so rapidly, entitle them to borrow yet more.
To compound that error, the Chancellor made the fatal mistake of his Budget judgment. In his Budget, he stoked up demand yet further by giving tax cuts to the rich—tax cuts which they, the high-spending consumers, not only used directly to spend on imports and consumption, but which they then used to persuade themselves that, with further tax cuts yet to come, they too could borrow yet more. That is where the demand has come from, and that is where the Chancellor has lost control.
The result has certainly been a boom all right, but it is an unsustainable and unbalanced one. That has been the theme of virtually every contribution to this debate. That boom has been unbalanced, first and most cruelly and unfairly—as my hon. Friend the Member for Dunfermline, East (Mr. Brown) has pointed out—between the rich and poor. The tax cuts have gone to the rich and the penalties have gone to the millions of low-paid and poor families of this country. That is the cruel injustice of the decision that we believe is about to be announced on child benefit.
The boom is also unbalanced as between north and south. Some hon. Members have tried to suggest that the problem of regional imbalance is no longer with us—what nonsense. We have the obscenity of economic decisions being made by south-east politicians in the interests of the south-east—the so-called overheating south-east—while jobs, economic power and economic decision-making are still ebbing away from the north of England, Wales and Scotland.
The boom is unbalanced as between private sector and public sector expenditure. Public expenditure has been screwed down and public services have been starved of funds while the private sector and the private financial institutions have been allowed to create tens and tens of billions of pounds of new credit. That is where the imbalance lies.
The imbalance in the boom has also created, most seriously, a further imbalance between consumption—that is where the personal sector credit has gone—and investment. I shall discuss investment levels later.

Mr. Quentin Davies: Will the hon. Gentleman give way?

Mr. Gould: I am short of time, and I shall not be giving way.
To say that the boom is unbalanced is simply another way of describing an extremely familiar phenomenon—the good old-fashioned stop-go cycle. It may be more accurate to describe it as a go-stop cycle. So far, what we have had is the go. There has never been any difficulty in, there has been no magical mystery and no credit to be gained from, stoking up demand—any idiot can do that. There are idiots one could point to who have done precisely that. The trick has always been to match that demand from British industry, to meet demand from British supply and British production. That is where we have so miserably failed.
Ironically, the nearest parallel to the experience of the past two years are the much reviled years of the Heath-Barber boom. The period of 1972–73 is that which most closely parallels the rake's progress of the Chancellor. How scornful they were about that

experience; how rigorous they were going to he in avoiding those mistakes. Yet here we are, with the Chancellor presiding over a demand explosion that is simply out of control. We have a demand policy that, at the very best, has been widely inconsistent as between the monetarist madness of the early 1980s and the Barber-type splurge of recent years.
Even that is only half the story. It suits the Chancellor very well to plead guilty to what I regard as the lesser charge—that he has allowed demand to rise too rapidly over the short term. Therefore, he has been able to say, "Yes, I was wrong. I did make a mistake." It is very pleasant to hear that. The Chancellor, however, can also say, if we let him get away with it, that therefore the problem is only temporary and that it can be reined back. The Chancellor can say that it is only a blip and that interest rates will eventually deal with it, even if the blip turns into a rather elongated bleep. However, Opposition Members will not allow the Chancellor to escape with that. The truth is that his misdemeanours and felonies have been more serious. They are longer in term and more deeply seated than simply failing to keep short-term control over demand.
The Conservative Government came to power committed to strengthening the supply side of British industry, so that we would never again run into that imbalance between demand and supply which had so disfigured earlier Conservative Governments. However, the first effect of Tory policy was paradoxical, because it did not strengthen the supply side but wiped out 20 per cent. of Britain's manufacturing industry. We are still paying the price for that calamity. We are still saddled with industry which is not leaner and fitter but smaller and weaker and which is unable to meet the rise in demand when it occurs.
The Chancellor may believe that he has enjoyed—

Mr. Quentin Davies: rose

Mr. Gould: No, I shall not give way.
The Chancellor may believe in his propaganda about the supply-side miracle, but very few other people will believe him. Rising demand has simply shown that the supply-side failure is complete. Much has been made—the Chancellor was at it again today—of the so-called productivity gains. Those productivity gains demonstrate nothing more than the fact that it is possible to produce the same output with less labour. All that means is unemployment unless we secure the answer to the problem of increasing output, which is the one thing that the Government have not yet managed to achieve.
It is our competitors, not British industry, who have met the increased demand which the Chancellor has unleashed. Imports have surged; exports this year have actually fallen and exports of manufactures have stayed flat. The benefits of the growth of which the Chancellor is so proud have gone largely to foreign economies rather than to our own. Supply-side figures explain why our trade deficit is so terrifying and why it is a concealed manifestation of the nascent inflation problem.
Our inflation rate is already higher than that of our major competitors. It is already rising sharply. We are told that it is the centrepiece of the Government's economic strategy, that it is the great jewel in the crown of the Government's economic achievement, yet it is higher today as a proportion of the average of the leading


industrial countries than it was in 1979. It is between three and six times higher than the inflation rates of our major competitors. We are now at the bottom of the league of G7 countries in terms of inflation. That is why the indices of competitiveness—not indices which I bother to keep, but those which the Government keep—show conclusively that British industry is less able to compete in international markets today. That is why our share of world trade is down to 6·9 per cent.—its lowest level ever.
Earlier today, the Chancellor attempted to get away with arguing that those figures were in some sense faulty or unreliable, but the fact is that they are the best figures we have, and they show our share of world trade slipping disastrously. Because of that loss of competitiveness, we are now staring in the face a terrifying deficit in our balance of payments, a deficit of £15 billion in manufactured goods and virtually the same size deficit in trade generally.
Attempts have been made by the Chancellor as well as by other Conservative Members to argue that somehow that trade deficit does not matter. As my hon. Friend the Member for Dunfermline, East said when he opened the debate, that is a remarkable claim. This would have been the first occasion on which a balance of payments deficit had been so regarded, notwithstanding the fact that it is by far the largest in our recorded history.
Of course the balance of payments deficit matters—first, because it shows that the economy simply cannot pay its way. It is the best indicator we have that the economy has lost competitiveness and cannot hold its own. Secondly, it matters because it represents a turnaround in our trade and manufactured goods worth approaching £18 billion or £19 billion. If we were to produce that volume of goods in British factories, it would take over 1·5 million British workers.
Thirdly, it matters because of the response that the Chancellor is compelled to make to that incipient and growing problem. Interest rates are being forced up, which means that the hopes of industrial expansion referred to by my hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington) must be dashed. Finally, it matters because in the end it will mean a loss of confidence in the Chancellor's and the Government's handling of the economy. Sooner or later, that policy will come crashing down around the ears of the Chancellor, and that is when we shall all have to pay the penalty for his foolishness and his mistakes.
After nine years of North sea oil, privatisation, deregulation, selling off public assets, attacks on trade union rights and trying to shift the balance of industrial power, the supply-side problems remain unresolved. British industry is no more able to increase output or to meet that demand than it was when the Government came to power. Here we are, nine years after the unprecedented opportunity of North sea oil, representing billions of pounds. Those billions of pounds have gone into paying for unemployment, investment abroad and tax cuts that have sucked in imports. They have gone everywhere but where they truly matter, and where they could have done some good in restructuring British industry and preparing our economy for the 1990s.
The consequence of that wilful failure is that we are now in no condition to face the 1990s. We shall then be in

a much more difficult and competitive world. We shall not have the cushion of oil. We shall have a much more competitive environment, with the internal market and newly industrialising countries coming on stream. We shall have to embrace a new technology for which we are woefully unprepared. We are simply failing to invest in the science, research and development and training that our competitors are undertaking.
The problem is that the greatest obstacle to our future in the 1990s remains Government policy. By pushing up interest rates, the Government ensure that they are using the weapon least suited to our real problems and most damaging to the supply side of British industry. Moreover, the Chancellor is again showing his predilection, and the predilection of the Government, for taking short-term monetary measures rather than dealing with the longer-term needs of industry.
What a gyration there has been over monetary policy. The Chancellor has taken up and abandoned monetary targets with bewildering rapidity. He has tried sterling M3 and sterling M1: we have gone down a veritable spaghetti junction of monetary targets. Even M0, so long the favourite, is now misbehaving.
Even on the exchange rate—which we must assume is now his major monetary measure—the Chancellor is shown to be a man of straw. Six months ago, he was telling us that he had a target of 3 deutschmarks to the pound and that a range of 3 deutschmarks 10 pfennigs was unsustainable. Now he is telling us, in response to pressures from the markets, that he will put up interest rates yet again to hold the pound at around 3 marks 15 pfennigs. On exchange rates, the Chancellor cannot be accused of being a yes man. When the boss says no, he says no.
The Chancellor has a reputation as something of a card player. That conjures up a rather attractive, if rakish, image of a sort of riverboat gambler, but I have concluded that the Chancellor's pet and most expert card game is not poker but building card houses. Initially, he helped to create a ground floor of cards based on ludicrously tight monetary targets and weakening the supply side of our economy. When that proved disastrous, he switched, and created yet another rather less stable tier to that already unstable foundation. He created a tier of soaring demand which sucked in imports and made the structure even less stable.
When that started to look threatened and seemed on the point of collapse, the right hon. Gentleman built yet another layer of cards, trembling this time. He built on the old mistakes of high interest rates and an over-valued exchange rate, doing yet further damage to the foundations of our economy. Now, when that threatens to make the structure even more unstable, he tells us that he will create a fourth storey, of higher interest rates. Those cards are teetering and trembling and cannot be sustained for much longer. When they collapse, everything will collapse and then we shall discover that the stakes in the game he has been playing have been not chips in some poker game, but real jobs, living standards and lives. That is what the Chancellor is risking and gambling over.
The Chancellor stands indicted of far more than just losing control of the market. His crime is the short-sighted, irresponsible approach to the task of building the real strength of the economy. A loss of control of demand can be corrected—not without pain or a renewed threat of rising unemployment, but eventually it can be corrected.


His real failures will, however, subsist for a long time. The price that people will have to pay for those failures will subsist for a long time. There is only one corrective for those errors—a new Chancellor, and a new Government.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Anthony Newton): Several right hon. and hon. Members on both sides have extended their good wishes to the right hon. and learned Member for Monklands, East (Mr. Smith) in his absence and I certainly wish to add mine, especially as I come relatively fresh to these debates and have not so far had an opportunity to cross swords with him. We hope that he will make a rapid and complete recovery to return and take part in our debates.
I should like, too, to join hon. Members, again from both sides, who have been rightly complimentary about the distinguished maiden speech of my hon. Friend the Member for Kensington (Mr. Fishburn). I have listened to a fair number of such speeches, not all of which have conformed with what used to be taken to be the conventions of maiden speeches, and this was a maiden speech of high quality and in the best traditions of the House, both in the way that he phrased his points and in his tributes to his predecessor. I join those who congratulated him on it and said how warmly they look forward to hearing him take part in our debates. [Interruption.] Is the hon. Gentleman looking for a compliment?

Mr. Dennis Skinner: The right hon. Gentleman has got plenty on looking after Lord Young.

Mr. Newton: I was interested in my hon. Friend's references to the ethnic minorities in his community and the undoubted urban problems of much of the area he represents. They are a particular concern of mine, as I am responsible for the co-ordination of Government policy in inner-city areas. It may help him to know that tomorrow we shall launch a joint development fund of some interest in his constituency. It has been put together by the North Kensington task force and the Midland bank to help his area—just as we have helped so many others—provide new funds and encouragement for the launch and expansion of small businesses, which are so strong a feature of the economic recovery that is taking place.
The fundamental weakness of the case that the Opposition have sought to deploy in the debate was most clearly revealed in the somewhat tortured metaphors used by the hon. Member for Dagenham (Mr. Gould). No Opposition Member has shown any sign of being able to dispute the central facts of the change from stagnation to resurgence in the British economy in the past eight or nine years.
We are now in the eighth successive year of an economic growth that has averaged 3 per cent. That is the longest period of such growth for half a century.

Mr. Kevin Barron: What about youth unemployment?

Mr. Newton: We have not only kept up with what others have achieved; we have grown faster than all other major European Community countries since 1980.
The hon. Member for Rother Valley (Mr. Barron) intervened from a sedentary position a moment ago,

asking about unemployment. I shall tell him about unemployment. Adult unemployment has fallen for 26 months in succession, by almost 1 million—[Interruption.]

Mr. Morgan: rose—

Mr. Speaker: Order. The hon. Member for Dagenham (Mr. Gould) was listened to with respect. The Minister should have an equally fair hearing.

Mr. Terry Lewis: What were the undoctored unemployment figures in 1979, and what are the doctored figures now?

Mr. Newton: The real comparison to draw between 1979 and now is the fact that unemployment was rising then and is falling now—[Interruption.] The Opposition do not want to hear these facts because they do not like them, but they are the true facts about the British economy.
The unemployment rate has fallen faster over the past year in this than in any other major industrialised country.

Mr. Barron: Will the right hon. Gentleman give way?

Mr. Newton: I shall not.

Mr. Barron: rose

Mr. Newton: The hon. Gentleman made his intervention sitting down. I have dealt with it, and as far as I am concerned he can stay sitting down.
Quite apart from what has happened to unemployment since 1983, there has been a sharply rising trend in employment. It is up by more than 2 million, which again is more than in any other European country. One of the most striking features about this—it links in with what I said a moment ago to my hon. Friend the Member for Kensington—is that self-employment has risen every year since the Government came to office, with a total increase of about a million, which is a figure more than 50 per cent. higher than before and six times as much as in the previous 30 years. It is from that that a great deal of our new employment and economic strength comes.

Mr. Morgan: I realise that the right hon. Gentleman is new to this subject and that he may be the first Newton to try to defy the law of gravitas. It is not good enough to attempt to use a base of 1983 for these employment statistics. All that he demonstrates by doing that is that if the Government do as much damage as they can in their first two years they can then attempt to get the credit for repairing some of it in subsequent years.

Mr. Newton: What I am demonstrating as much as anything else is that it took some time to overcome the legacy that we acquired from the previous Government.
On unemployment and employment, the comparisons with our neighbours and competitors and, indeed, our friends in Europe, stand up to comparisons of any type. If one looks at unemployment changes in the latest month for which the figures are available compared with a year earlier, one finds that the position in the United Kingdom is markedly better than in any other of the main OECD competitor nations. [Interruption] The hon. Member for Dagenham wanted the figures of the change in the unemployment rate over the latest month—

Mr. Gould: That was not the question that I asked. The question that I asked was whether the Minister would give us the rates of unemployment in the EEC countries, not


the rate of change, because the latter would obscure the fact that the Government have created a level of unemployment that no advanced industrial country has experienced in modern times.

Mr. Newton: I can well understand why the hon. Gentleman does not like the figures of change for the latest month compared with a year earlier. If he does not like those figures, I shall give him some of the latest figures for the actual rates. In Spain, the unemployment rate in May was nearly 20 per cent. In France, in July, it was 10·5 per cent. In Belgium, in July, it was 10·3 per cent. In the Netherlands, in July, it was 9·5 per cent.; and in the United Kingdom, in July, it was 8·2 per cent.
The Opposition motion states how the Government's policies have
damaged the country's trading and industrial interests".
But the plain fact is that the growth in output and the fall in unemployment that I have described and the rise in living standards that has taken place could and have been possible only because of the huge improvement in performance of those trading and industrial interests.

Mr. Tony Marlow: May I draw my right hon. Friend's attention to the fact that the Leader of the Opposition, who takes great pride in using unparliamentary language—I think that he is the first Leader of the Opposition ever to have done so—was making a sedentary intervention? He said that growth used to happen every year. Will my right hon. Friend make some comparisons, for the benefit of the Leader of the Opposition, between what the growth rate has been recently and what it was under the previous Government?

Mr. Newton: I am grateful to my hon. Friend. I have already given precisely those comparisons and discovered that the Opposition have no desire to listen to them, which is not surprising.
It is the strengthening of those trading and industrial interests of which the Opposition motion speaks that can be seen clearly in many of the other facts and figures about what is happening in the British economy. The productivity of manufacturing industry in the United Kingdom has improved by no less than one half since 1980, and again, that is a rate of improvement matched by no other industrial country. Manufacturing output is running at all-time record levels and in the three months to August of this year it was 7 per cent. higher than in the same period a year earlier.
We have heard much talk in the debate about the level of investment. Our investment intentions survey in June showed that manufacturing investment this year is likely to be no less than 16 per cent. higher than in 1987. All the latest signs are that an increase of that order will be achieved.
In his speech my right hon. Friend the Chancellor spoke about the quarterly industrial trends survey for October published this morning by the Confederation of British Industry. It starts by saying that the survey shows that "business confidence remains good". About manufacturing, the survey says:
For the fifth survey in succession, manufacturing employment continues to increase: a balance of +4 per cent. of companies report increases in their workforce over the past four months, indicating a slightly more moderate rate of growth than surveys earlier in the year. Job gains are expected

by a balance of +4 per cent. of companies over coming months. The fastest rate of growth is indicated by smaller firms.
Opposition Members asked about exports. Today's survey said:
Optimism about exports has improved further since July. A balance of +7 per cent. in October compares with a +8 per cent. in the previous survey, although the rate of growth in export orders has slowed in the past four months.
When I saw the CBI survey this morning, which reported the news which I hope I have given to the House in a balanced way, I thought that it might be interesting to look back at one of the surveys for the early part of 1979. I shall read two sentences from the survey of January 1979.

Mr. Robin Corbett: What about 1066?

Mr. Newton: It says:
Confidence within manufacturing industry,"—
that is the great totem pole of every speech by Opposition Members—
which, as the chart shows, has been extremely hesitant over the past couple of years, has turned down.
That was the position in the early part of 1979.

Mr. Tony Banks: rose—

Mr. Speaker: Order. The Minister is not giving way.

Mr. Newton: In their speeches the hon. Members for Dagenham, for Oxford, East (Mr. Smith) and for Dunfermline, East (Mr. Brown) queried the extent to which the fall in unemployment, the rise in output and the increase in Britain's prosperity were being spread around the country. The hon. Member for Dagenham spoke about how the prosperity in the south was accompanied by what he described as continued decline in the north.
The resurgent prosperity of the economy is spreading from one part of the country to another, and that is shown clearly in all the statistics. From March 1986 to September 1988, the unemployment rate in the north generally fell from just over 13·5 per cent. to just over 10 per cent. Over the last year, the largest falls in the rate of unemployment have been recorded in the west midlands, Wales, the north and the north-west. If anyone doubts that, he has only to consider the decision, which has been referred to several times today—the latest decision among many, including that of Nissan in the Sunderland area—of Ford to locate its major new investment at Bridgend in south Wales.

Mr. Robert Litherland: The right hon. Gentleman referred to the north-west. I dispute the figures that he gave. In the inner city of Manchester, male unemployment is 36 per cent. and still rising.

Mr. Newton: What I said, and what is true, is that unemployment is falling throughout the country, and the largest falls in the past year have been recorded in the regions, including the north-west.

Mr. Neil Kinnock: We have all listened closely to the Minister and the detail that he has given. Can he tell us before the debate ends whether he considers a balance of payments deficit at an annual rate of £12 billion to be evidence of the Government's success, or of the Government's failure?

Mr. Newton: What I will tell the right hon. Gentleman is that the balance of payments position reflects the strong growth of the British economy, including the strength of


investment. A substantial part of those figures represents semi-manufactures and capital goods. What is more important—perhaps it is the most significant point for the right hon. Gentleman and his right hon. and hon. Friends—is the difference between the present balance of payments and that which brought the economy to a grinding halt under a Labour Government, when the International Monetary Fund came in, and the greater confidence that today exists throughout the world in the capacity of the British Government and the strength of the British economy.
Perhaps the most remarkable thing about this debate is the fact that there is no other legislature in the world in which this discussion about the British economy could have taken place. Every other country is discussing in terms of admiration, and sometimes envy, the British economy's transformation during the past nine years. They are discussing what they can learn from how we have changed what was universally regarded as the sick economy of Europe in the 1970s to one of the strongest economies in the world in the 1980s.
We have not learnt a single thing today about what the Opposition would do. We have not heard a word about what policies they would pursue which are different from the policies that landed us in the stagnation and inflation of the 1970s. All that we have learnt is that the British Labour party does not like success, does not understand success and does not know how to maintain success.

Question put, pursuant to the order of 21 October, That the original words stand part of the Question:

The House divided: Ayes 213, Noes 322.

Division No. 452]
[10.00 pm


AYES


Abbott, Ms Diane
Clwyd, Mrs Ann


Adams, Allen (Paisley N)
Cohen, Harry


Allen, Graham
Coleman, Donald


Anderson, Donald
Cook, Robin (Livingston)


Archer, Rt Hon Peter
Corbett, Robin


Ashton, Joe
Cousins, Jim


Banks, Tony (Newham NW)
Crowther, Stan


Barnes, Harry (Derbyshire NE)
Cryer, Bob


Barnes, Mrs Rosie (Greenwich)
Cummings, John


Barron, Kevin
Cunliffe, Lawrence


Battle, John
Cunningham, Dr John


Beckett, Margaret
Darling, Alistair


Beith, A. J.
Davies, Rt Hon Denzil (Llanelli)


Bell, Stuart
Davies, Ron (Caerphilly)


Benn, Rt Hon Tony
Davis, Terry (B'ham Hodge H'l)


Bennett, A. F. (D'nt'n &amp; R'dish)
Dewar, Donald


Bidwell, Sydney
Dixon, Don


Blair, Tony
Dobson, Frank


Blunkett, David
Doran, Frank


Boateng, Paul
Douglas, Dick


Boyes, Roland
Duffy, A. E. P.


Bradley, Keith
Eadie, Alexander


Bray, Dr Jeremy
Evans, John (St Helens N)


Brown, Gordon (D'mline E)
Ewing, Harry (Falkirk E)


Brown, Nicholas (Newcastle E)
Ewing, Mrs Margaret (Moray)


Brown, Ron (Edinburgh Leith)
Fatchett, Derek


Bruce, Malcolm (Gordon)
Fearn, Ronald


Buchan, Norman
Field, Frank (Birkenhead)


Buckley, George J.
Fields, Terry (L'pool B G'n)


Caborn, Richard
Fisher, Mark


Campbell, Menzies (Fife NE)
Flannery, Martin


Campbell, Ron (Blyth Valley)
Flynn, Paul


Campbell-Savours, D. N.
Foster, Derek


Carlile, Alex (Mont'g)
Foulkes, George


Cartwright, John
Fraser, John


Clark, Dr David (S Shields)
Fyfe, Maria


Clarke, Tom (Monklands W)
Galbraith, Sam


Clay, Bob
Galloway, George


Clelland, David
Garrett, John (Norwich South)





Garrett, Ted (Wallsend)
Michie, Bill (Sheffield Heeley)


George, Bruce
Michie, Mrs Ray (Arg'l &amp; Bute)


Godman, Dr Norman A.
Mitchell, Austin (G't Grimsby)


Golding, Mrs Llin
Moonie, Dr Lewis


Gordon, Mildred
Morgan, Rhodri


Gould, Bryan
Morley, Elliott


Graham, Thomas
Morris, Rt Hon J. (Aberavon)


Grant, Bernie (Tottenham)
Mullin, Chris


Griffiths, Nigel (Edinburgh S)
Murphy, Paul


Griffiths, Win (Bridgend)
Nellist, Dave


Grocott, Bruce
Oakes, Rt Hon Gordon


Hardy, Peter
O'Brien, William


Harman, Ms Harriet
O'Neill, Martin


Hattersley, Rt Hon Roy
Orme, Rt Hon Stanley


Heffer, Eric S.
Owen, Rt Hon Dr David


Henderson, Doug
Patchett, Terry


Hinchliffe, David
Pendry, Tom


Hogg, N. (C'nauld &amp; Kilsyth)
Pike, Peter L.


Holland, Stuart
Powell, Ray (Ogmore)


Home Robertson, John
Prescott, John


Hood, Jimmy
Primarolo, Dawn


Howarth, George (Knowsley N)
Quin, Ms Joyce


Howell, Rt Hon D. (S'heath)
Radice, Giles


Howells, Geraint
Redmond, Martin


Hoyle, Doug
Rees, Rt Hon Merlyn


Hughes, John (Coventry NE)
Reid, Dr John


Hughes, Robert (Aberdeen N)
Richardson, Jo


Hughes, Roy (Newport E)
Roberts, Allan (Bootle)


Hughes, Simon (Southwark)
Robertson, George


Illsley, Eric
Robinson, Geoffrey


Ingram, Adam
Rogers, Allan


Janner, Greville
Rooker, Jeff


John, Brynmor
Sedgemore, Brian


Johnston, Sir Russell
Sheerman, Barry


Jones, Barry (Alyn &amp; Deeside)
Short, Clare


Jones, leuan (Ynys Môn)
Skinner, Dennis


Jones, Martyn (Clwyd S W)
Smith, Andrew (Oxford E)


Kaufman, Rt Hon Gerald
Smith, C. (Isl'ton &amp; F'bury)


Kennedy, Charles
Snape, Peter


Kinnock, Rt Hon Neil
Soley, Clive


Lambie, David
Spearing, Nigel


Lamond, James
Steel, Rt Hon David


Leadbitter, Ted
Steinberg, Gerry


Lestor, Joan (Eccles)
Stott, Roger


Lewis, Terry
Strang, Gavin


Litherland, Robert
Straw, Jack


Livingstone, Ken
Taylor, Mrs Ann (Dewsbury)


Livsey, Richard
Taylor, Matthew (Truro)


Lloyd, Tony (Stretford)
Thomas, Dr Dafydd Elis


Lofthouse, Geoffrey
Thompson, Jack (Wansbeck)


Loyden, Eddie
Turner, Dennis


McAllion, John
Vaz, Keith


McAvoy, Thomas
Wall, Pat


McCartney, Ian
Wallace, James


Macdonald, Calum A.
Walley, Joan


McFall, John
Wardell, Gareth (Gower)


McKelvey, William
Wareing, Robert N.


McLeish, Henry
Welsh, Andrew (Angus E)


Maclennan, Robert
Wigley, Dafydd


McNamara, Kevin
Williams, Rt Hon Alan


McTaggart, Bob
Williams, Alan W. (Carm'then)


McWilliam, John
Winnick, David


Mahon, Mrs Alice
Wise, Mrs Audrey


Marek, Dr John
Worthington, Tony


Marshall, Jim (Leicester S)
Wray, Jimmy


Martlew, Eric



Maxton, John
Tellers for the Ayes:


Meacher, Michael
Mr. Frank Haynes and


Meale, Alan
Mr. Allen McKay.


Michael, Alun





NOES


Aitken, Jonathan
Arnold, Jacques (Gravesham)


Alexander, Richard
Arnold, Tom (Hazel Grove)


Alison, Rt Hon Michael
Ashby, David


Allason, Rupert
Aspinwall, Jack


Amery, Rt Hon Julian
Atkinson, David


Amess, David
Baker, Rt Hon K. (Mole Valley)


Amos, Alan
Baker, Nicholas (Dorset N)


Arbuthnot, James
Baldry, Tony






Batiste, Spencer
Fox, Sir Marcus


Beaumont-Dark, Anthony
Franks, Cecil


Bellingham, Henry
Freeman, Roger


Bendall, Vivian
French, Douglas


Bennett, Nicholas (Pembroke)
Fry, Peter


Benyon, W.
Gale, Roger


Bevan, David Gilroy
Gardiner, George


Biffen, Rt Hon John
Gill, Christopher


Blackburn, Dr John G.
Gilmour, Rt Hon Sir Ian


Blaker, Rt Hon Sir Peter
Glyn, Dr Alan


Body, Sir Richard
Goodlad, Alastair


Bonsor, Sir Nicholas
Goodson-Wickes, Dr Charles


Boscawen, Hon Robert
Gorman, Mrs Teresa


Boswell, Tim
Gorst, John


Bottomley, Peter
Gow, Ian


Bowden, A (Brighton K'pto'n)
Gower, Sir Raymond


Bowden, Gerald (Dulwich)
Grant, Sir Anthony (CambsSW)


Bowis, John
Greenway, Harry (Ealing N)


Boyson, Rt Hon Dr Sir Rhodes
Greenway, John (Ryedale)


Braine, Rt Hon Sir Bernard
Gregory, Conal


Brandon-Bravo, Martin
Griffiths, Peter (Portsmouth N)


Brazier, Julian
Grist, Ian


Bright, Graham
Ground, Patrick


Brooke, Rt Hon Peter
Grylls, Michael


Brown, Michael (Brigg &amp; Cl't's)
Gummer, Rt Hon John Selwyn


Browne, John (Winchester)
Hamilton, Hon Archie (Epsom)


Bruce, Ian (Dorset South)
Hamilton, Neil (Tatton)


Buck, Sir Antony
Hampson, Dr Keith


Budgen, Nicholas
Hanley, Jeremy


Burns, Simon
Hannam, John


Burt, Alistair
Hargreaves, A. (B'ham H'll Gr')


Butcher, John
Hargreaves, Ken (Hyndburn)


Butler, Chris
Harris, David


Butterfill, John
Haselhurst, Alan


Carlisle, John, (Luton N)
Hawkins, Christopher


Carlisle, Kenneth (Lincoln)
Hayes, Jerry


Carrington, Matthew
Hayhoe, Rt Hon Sir Barney


Cash, William
Hayward, Robert


Chalker, Rt Hon Mrs Lynda
Heathcoat-Amory, David


Channon, Rt Hon Paul
Heddle, John


Chapman, Sydney
Heseltine, Rt Hon Michael


Chope, Christopher
Hicks, Mrs Maureen (Wolv' NE)


Churchill, Mr
Hicks, Robert (Cornwall SE)


Clark, Dr Michael (Rochford)
Higgins, Rt Hon Terence L.


Clarke, Rt Hon K. (Rushcliffe)
Hill, James


Colvin, Michael
Hind, Kenneth


Conway, Derek
Hogg, Hon Douglas (Gr'th'm)


Coombs, Anthony (Wyre F'rest)
Hordern, Sir Peter


Cope, Rt Hon John
Howard, Michael


Couchman, James
Howarth, Alan (Strat'd-on-A)


Cran, James
Howarth, G. (Cannock &amp; B'wd)


Critchley, Julian
Howe, Rt Hon Sir Geoffrey


Currie, Mrs Edwina
Howell, Ralph (North Norfolk)


Davies, Q. (Stamf'd &amp; Spald'g)
Hughes, Robert G. (Harrow W)


Davis, David (Boothferry)
Hunt, David (Wirral W)


Day, Stephen
Hunt, John (Ravensbourne)


Devlin, Tim
Hunter, Andrew


Dickens, Geoffrey
Hurd, Rt Hon Douglas


Dicks, Terry
Irvine, Michael


Dorrell, Stephen
Jack, Michael


Douglas-Hamilton, Lord James
Jackson, Robert


Dover, Den
Janman, Tim


Dunn, Bob
Johnson Smith, Sir Geoffrey


Durant, Tony
Jones, Gwilym (Cardiff N)


Dykes, Hugh
Jones, Robert B (Herts W)


Eggar, Tim
Kellett-Bowman, Dame Elaine


Emery, Sir Peter
Key, Robert


Evans, David (Welwyn Hatf'd)
Kilfedder, James


Evennett, David
King, Roger (B'ham N'thfield)


Fallen, Michael
Kirkhope, Timothy


Favell, Tony
Knapman, Roger


Fenner, Dame Peggy
Knight, Greg (Derby North)


Field, Barry (Isle of Wight)
Knight, Dame Jill (Edgbaston)


Finsberg, Sir Geoffrey
Knowles, Michael


Fishburn, John Dudley
Knox, David


Fookes, Miss Janet
Lamont, Rt Hon Norman


Forman, Nigel
Lang, Ian


Forsyth, Michael (Stirling)
Latham, Michael


Forth, Eric
Lawson, Rt Hon Nigel


Fowler, Rt Hon Norman
Lee, John (Pendle)





Leigh, Edward (Gainsbor'gh)
Roberts, Wyn (Conwy)


Lennox-Boyd, Hon Mark
Roe, Mrs Marion


Lightbown, David
Rost, Peter


Lilley, Peter
Rumbold, Mrs Angela


Lloyd, Sir Ian (Havant)
Sackville, Hon Tom


Lloyd, Peter (Fareham)
Sainsbury, Hon Tim


Lord, Michael
Sayeed, Jonathan


Luce, Rt Hon Richard
Scott, Nicholas


Lyell, Sir Nicholas
Shaw, David (Dover)


McCrindle, Robert
Shaw, Sir Giles (Pudsey)


Macfarlane, Sir Neil
Shepherd, Colin (Hereford)


MacGregor, Rt Hon John
Shepherd, Richard (Aldridge)


MacKay, Andrew (E Berkshire)
Shersby, Michael


Maclean, David
Skeet, Sir Trevor


McLoughlin, Patrick
Smith, Sir Dudley (Warwick)


McNair-Wilson, Sir Michael
Smith, Tim (Beaconsfield)


McNair-Wilson, P. (New Forest)
Soames, Hon Nicholas


Madel, David
Speed, Keith


Major, Rt Hon John
Spicer, Sir Jim (Dorset W)


Malins, Humfrey
Spicer, Michael (S Worcs)


Mans, Keith
Squire, Robin


Maples, John
Stanbrook, Ivor


Marland, Paul
Stanley, Rt Hon John


Marlow, Tony
Steen, Anthony


Marshall, Michael (Arundel)
Stern, Michael


Martin, David (Portsmouth S)
Stewart, Andy (Sherwood)


Maude, Hon Francis
Stokes, Sir John


Maxwell-Hyslop, Robin
Stradling Thomas, Sir John


Mayhew, Rt Hon Sir Patrick
Sumberg, David


Mellor, David
Summerson, Hugo


Meyer, Sir Anthony
Tapsell, Sir Peter


Miller, Sir Hal
Taylor, John M (Solihull)


Mills, Iain
Taylor, Teddy (S'end E)


Miscampbell, Norman
Tebbit, Rt Hon Norman


Mitchell, Andrew (Gedling)
Thatcher, Rt Hon Margaret


Mitchell, David (Hants NW)
Thompson, D. (Calder Valley)


Moate, Roger
Thompson, Patrick (Norwich N)


Monro, Sir Hector
Thorne, Neil


Moore, Rt Hon John
Thurnham, Peter


Morris, M (N'hampton S)
Townend, John (Bridlington)


Morrison, Sir Charles
Townsend, Cyril D. (B'heath)


Morrison, Rt Hon P (Chester)
Tracey, Richard


Moss, Malcolm
Tredinnick, David


Mudd, David
Trippier, David


Neale, Gerrard
Trotter, Neville


Nelson, Anthony
Twinn, Dr Ian


Newton, Rt Hon Tony
Vaughan, Sir Gerard


Nicholls, Patrick
Waddington, Rt Hon David


Nicholson, David (Taunton)
Wakeham, Rt Hon John


Nicholson, Emma (Devon West)
Waldegrave, Hon William


Onslow, Rt Hon Cranley
Walden, George


Oppenheim, Phillip
Walker, Bill (T'side North)


Page, Richard
Walker, Rt Hon P. (W'cester)


Parkinson, Rt Hon Cecil
Waller, Gary


Patnick, Irvine
Walters, Sir Dennis


Patten, Chris (Bath)
Ward, John


Patten, John (Oxford W)
Wardle, Charles (Bexhill)


Pattie, Rt Hon Sir Geoffrey
Warren, Kenneth


Pawsey, James
Watts, John


Peacock, Mrs Elizabeth
Wheeler, John


Porter, Barry (Wirral S)
Whitney, Ray


Porter, David (Waveney)
Widdecombe, Ann


Portillo, Michael
Wiggin, Jerry


Powell, William (Corby)
Wilkinson, John


Price, Sir David
Wilshire, David


Raffan, Keith
Winterton, Mrs Ann


Raison, Rt Hon Timothy
Wolfson, Mark


Rathbone, Tim
Wood, Timothy


Redwood, John
Yeo, Tim


Renton, Tim
Young, Sir George (Acton)


Rhodes James, Robert
Younger, Rt Hon George


Riddick, Graham



Ridley, Rt Hon Nicholas
Tellers for the Noes:


Ridsdale, Sir Julian
Mr. Tristan Garel-Jones and


Rifkind, Rt Hon Malcolm
Mr. Michael Neubert.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to the Order of 21 October, and agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,
'That this House congratulates Her Majesty's Government on its economic policies which have led to unemployment falling faster than in any other major country, manufacturing output at record levels and investment rising rapidly; welcomes the Government's achievements in restoring the public finances to such strength that the national debt is being repaid, while at the same time income tax rates have been reduced and public spending on priority programmes has been increased; commends the Government's firm stand against inflation and the action it has taken to secure monetary conditions that will exert further downward pressure on inflation; and applauds the Government's supply side policies which have enabled British industry to be more profitable than at any time for nearly 20 years and have led to manufacturing productivity growing faster than in any other major country during the 1980s.'.

BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, the Road Traffic Bill [Lords], the Road Traffic (Consequential Provisions) Bill  [Lords], and the Road Traffic Offenders Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Fallon.]

Orders of the Day — Road Traffic Bill [Lords]

Order for Second Reading read.

The Solicitor-General (Sir Nicholas Lyell): I beg to move, That the Bill be now read a Second time. [Interruption.]

Mr. Speaker: Order. Will Members not staying for the debate on the consolidation Bills please leave quietly?

The Solicitor-General: There are, in fact, three Bills relating to road traffic matters before the House, and with permission I shall speak to all three, as they should be considered as a unity.
The three Bills, taken together, amount to a consolidating measure. The principal subject matters are, first, the Road Traffic Act 1972—which, although itself a consolidation, has been considerably amended—secondly, part III of the Transport Act 1982, which set up the new procedure of fixed penalties for certain driving offences, and, thirdly, the provisions of the Road Traffic Regulation Act 1984 relating to the prosecution and punishment of offenders.
Where this consolidation differs from previous measures is in its structure. The Road Traffic Bill follows the structure of the 1972 Act, but the opportunity has been taken to simplify its provisions where possible. All the provisions of the measures to be consolidated that relate to prosecution and punishment have been brought together in the second Bill, the Road. Traffic Offenders Bill. The third Bill is ancillary to the other two. It contains the necessary repeals and transitional provisions as well as provisions in existing legislation that have not yet been brought into force and that would have been misleading if included in the text of the main Bill.
Not only will the division into separate Bills make each of more manageable size: it should also prove of considerable assistance to the courts' practitioners and all of us affected by the law relating to road traffic. I hope that the House will agree that it is a helpful innovation in the statutory process.
In preparing the consolidation, the Law Commission and the Scottish Law Commission issued a report in which they made a number of recommendations for amending the existing legislation, and those amendments appear in the Bills. All three Bills were referred in the usual way to the Joint Committee on Consolidation Bills during their passage in another place. The Committee reported that the recommendations of the Law Commissions were necessary to produce a satisfactory consolidation of the law and that the three Bills, taken together, amounted to a single consolidation.
I should tell the House that a small number of further amendments will be brought forward. They will make minor corrections and deal with the commencement of the consolidated legislation. It is also hoped that they will bring into the consolidation the provision of the Penalty Points (Alteration) Order, if approved by Parliament in time for inclusion in the consolidation.
As always, our thanks are due to the Law Commissions and to the draftsmen for their excellent work in the process of keeping the statute book in modern and accessible form.

Mr. Speaker: I understand that it would be for the convenience of the House to take the three Bills together, although I shall put the Questions separately.

Mr. John Fraser: I, too, congratulate the draftsmen on their energy and style. I cannot disagree that the Road Traffic (Consequential Provisions) Bill sits happily as a separate Bill. However, I think that many practitioners would have preferred the Road Traffic Bill and the Road Traffic Offenders Bill to have been together. In both prosecuting and defending offences, it is inevitable that one needs to look at both statutes during proceedings. I think that that must also be true for the police. The Bills are bound to be found together in "Stone's Justices' Manual" and other textbooks on the law. It might have been better to have had the two together. They will come fairly high up the league table, although not as high as some of the Revenue consolidations which find themselves in a single Bill.
With that reservation, we welcome the consolidation of the law, which makes it easier to follow and its understanding that much easier. I am therefore happy to welcome the Bills.

Question put and agreed to.

Bill committed to a Committee of the whole House.—[Mr. Fallon.]

Committee tomorrow.

Orders of the Day — ROAD TRAFFIC (CONSEQUENTIAL PROVISIONS) BILL [LORDS]

Bill read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Fallon.]

Committee tomorrow.

Orders of the Day — ROAD TRAFFIC OFFENDERS BILL [LORDS]

Bill read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Fallon.]

Committee tomorrow.

Orders of the Day — Wakefield Health Authority

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fallon.]

Mr. David Hinchliffe: I propose to raise a number of issues concerning the background to the removal of Sir Jack Smart as chairman of Wakefield district health authority. I should like to make it clear at the outset that I hold no particular brief for Sir Jack. Over a year ago, I called for his resignation as chair of the Wakefield health authority because of his refusal to defend my constituents in Wakefield against the cuts in the National Health Service being pursued by the present Government. Nevertheless, I feel strongly that Sir Jack's sacking in no way solves the serious problems that have arisen in Wakefield health authority.
My specific concern relates to the introduction of cook-chill catering. The Minister will be aware that I have been pressing for an independent public inquiry on this issue since July last year, but to no avail. Lord Skelmersdale, the then joint Parliamentary Under-Secretary of State wrote to me in a letter dated 31 July 1987:
Assessing the costs of the introduction of cook-chill must remain a matter for the individual health authorities concerned acting on the advice of their officers".
The Minister is aware from extensive correspondence and meetings with me that Wakefield health authority has stumbled from one financial crisis to another in recent years, with numerous cuts, closures and bed reductions.
I remind the Minister that in April 1987, £1·4 million was cut from the revenue budget and in August 1987, a further £1 million package of cuts was brought before the district health authority. We have had a number of examples, of which the Minister is aware, of urgent operations being cancelled—in one instance, for lack of £140,000 revenue to pay for 13 nurses in a neurosurgical unit at Pinderfields hospital. Against that background it should be a matter of deep concern to the Government that, through the most incompetent management advice, a cook-chill system estimated to cost £1 million in capital terms in fact cost £1·5 million and that the anticipated revenue savings of £300,000 per annum from cook-chill turned out to be £400,000 per annum additional revenue expenditure to be taken from a desperately hard-pressed patient care budget.
The central responsibility for the introduction of cook-chill in the Wakefield health authority area rests with Mr. Brian Birchall, the district general manager appointed to the authority in April 1985, folowing the Griffiths management restructuring. Despite the fact that the Stanley Royd inquiry had not reported, he persuaded the Wakefield health authority in July 1985 to confirm a district management team decision to invite Tricon, a food services consultancy firm, to examine the possibility of installing a cook-chill system at Stanley Royd. Tricon's report was presented to the district health authority in February 1986. By a small majority—I was in the minority as a member at the time—approval was given to the district general manager's proposal to establish a districtwide system of cook-chill catering.
It is crucial to my point that one of the objectives outlined in Mr. Birchall's report was


to create a viable unit of business as recommended by the latest guidance issued by the DHSS in respect of competitive tendering.
That is important in the context of some points I shall be making later.
Since that time, Sir Jack Smart has claimed that Mr. Brian Birchall was—to use Sir Jack's words—"foisted" on to the Wakefield health authority as its district general manager and that the authority was "duped" into accepting cook-chill.
Clearly, a number of fundamental errors, which were certainly the responsibility of Mr. Birchall, were made in the introduction of cook-chill in Wakefield. I shall give three specific examples. First, the district health authority's control of infection officer and committee, its consultant microbiologist, Professor Lacey, and most of its clinical staff were not aware of the cook-chill proposals until March 1987, when the catering staff refused to operate the system, on the grounds that it was unsafe. Secondly, I believe that it is an important fact that the proposals brought forward by Mr. Birchall clearly contravened the 1980 DHSS guidelines on cook-chill, with a number of serious errors. Thirdly, numerous additional costs that should have been anticipated were not considered in Mr. Birchall's original report.
In the time available, the subsequent events are far too numerous to mention. The important matter that needs to be dealt with by the Minister is that in the constituency of my hon. Friend the Member for Normanton (Mr. O'Brien), we have a new £1 million cook-chill central production unit which has been stood doing nothing for nearly two years because of the serious errors to which I have drawn attention. I believe those errors are the responsibility primarily of the district general manager. It is important to speculate about the extent of interest charges that must have accrued during the period that this valuable building has been empty, because that will be a drain on our local National Health Service budget.
I believe that the role of the Yorkshire regional health authority has been important in this matter. I should like to ask the Minister a number of specific questions to which it is crucial that she replies this evening.
First, why did the Yorkshire regional health authority invite Mr. Brian Birchall, the general manager of the Wakefield health authority—whose record on cook-chill in that authority was, frankly, a shambles—to chair the regional health authority's catering sub-committee that pressed ahead with the introduction of cook-chill catering throughout the Yorkshire region?
Secondly, why did the regional health authority inquiry, which led to the removal of Sir Jack Smart as the chair of the Wakefield health authority, fail to look at any of the issues—especially cook-chill—that were at the root of the conflict between the Wakefield district's general manager and its chair?
Thirdly, why has the regional health authority failed to respond to or contradict any of the detailed evidence concerning costings of cook-chill in Wakefield that was presented to its inquiry by the Wakefield health authority's former consultant microbiologist, Professor Richard Lacey?
Fourthly, why, after refusing to give additional money to the Pinderfields neurosurgery unit, and saying that Wakefield health authority should spend its share of the 1987 non-recurring revenue grant on cook-chill, did the regional health authority take the unprecedented step of

making a grant of £350,000 to the Wakefield health authority for the introduction of cook-chill earlier this year?
Fifthly, why, after all the grave doubts about the suitability of cook-chill for hospital catering in general, and then clear evidence of the huge cost of implementing cook-chill which would result in diversions of funds from patient care, has the regional health authority pressed ahead with the decision to implement cook-chill across the region?

Mrs. Alice Mahon: Is my hon. Friend aware that for some months I have been trying to discover which members sat on the sub-committee that took the decision that the new general hospital in Halifax would not have a production kitchen but would, in fact, have a cook-chill reception unit, and thereby allow privatisation to enter by the back door? I have made numerous requests. both to the regional health authority and to the Minister, and this week I received from the Minister a rude reply to my request for the names of the members of that sub-committee. The constituents in Halifax think that there is something amiss. They smell a rat. I wonder whether my hon. Friend is aware of that and will take that matter on board.

Mr. Hinchliffe: With respect to my hon. Friend, I have been sniffing those rats a little longer than she has. I hope that the Minister will respond to my hon. Friend, because the issues that she has raised about cook-chill in Halifax directly concern the people in Wakefield to whom I have referred.
The answers to the points that I have raised about the Yorkshire regional health authority lie in the crucial importance of cook-chill to companies tendering for National Health Service catering. It is a fact that private catering companies much prefer to mass-produce food from cook-chill units. They are happy to sit back and see vast amounts of public money, which should be spent on patient care, being used to install the facilities and equipment that they need so that they can move in and make a killing. Every year in the Yorkshire region, 10 million meals are produced—there is one hell of a killing to be made. Huge profits can be had; that is why this is such a ball game for the catering companies.
In Wakefield and the Yorkshire region, there are strong suspicions that certain parties to the issue are putting their commercial interests and concerns before the interests of NHS patients. That is the crux of the matter.
Two specific people should be mentioned in terms of Wakefield. Given the clear enthusiasm of the Yorkshire regional health authority for cook-chill, the business interests of the chair of that authority, Mr. Brian Askew, are of direct relevance. He is a director of the Sam Smith brewery in Tadcaster, which, of course, has recently developed significant catering interests.
The second person, to whom I have already referred and who has done more than most to promote cook-chill vigorously in Yorkshire, is Mr. Brian Birchall. Prior to coming to Wakefield his business background was at senior level with United Biscuits. That company has a large number of important catering subsidiaries.

Mr. Derek Fatchett: It also has friends in the Tory party.

Mr. Hinchliffe: Yes, it is close to the Tory party.
It is important to note that United Biscuits has recently opened a chilled food division based on South Humberside. Obviously, that division will be ideally placed to tender for the provision of cook-chill meals to hospitals throughout the Yorkshire region.
It is my sincere belief and the belief of many people in my area—people who have been silenced on this issue as the result of legal threats by Mr. Birchall—that Mr. Birchall has done a job, not for the NHS or the people of Wakefield, but for contacts within private industry who stand to gain substantially from his efforts on cook-chill. No doubt he also stands to gain because, at the end of his general manager contract, he will be ideally placed to obtain an extremely lucrative position advising private caterers about providing catering for the NHS.
The Minister may say that I am putting two and two together on the latter points that I have raised and making five. If that is her belief, she has a clear course of action open to her—to look at my allegations and the scandalous misuse of NHS resources in paving the way for privatised catering. The Minister can act, as a matter of urgency, by setting up a full public inquiry into this affair, including the role of the regional health authority. If she fails to do this, people will draw their own conclusions.

Mr. William O'Brien: rose

Mr. Deputy Speaker (Sir Paul Dean): Does the hon. Member have permission to intervene?

Mr. O'Brien: Yes, Sir. I wish to speak in support of my hon. Friend the Member for Wakefield (Mr. Hinchliffe) because the headquarters and the kitchen that has been built, but which is not in use, are in my constituency and service several hospitals in both the Wakefield and Normanton constituencies.
In my opinion, and in the opinion of many of my constituents, the situation that has developed in the management of Wakefield health authority leaves a lot to be desired. That situation appears to be deteriorating, and has deteriorated during the past few months. Constituents have complained to me that a whole ward has been disturbed at 11 o'clock at night in order to admit some patients by removing others from the ward. That demonstrates the acute shortages of accommodation and of effective management in Wakefield health authority.
Furthermore, the inquiry that was held at the behest of the regional health authority was nothing more than a kangaroo court because, when members of Wakefield district health authority were invited to give evidence which was heard by the committee—evidence which made allegations against the former chairman of Wakefield health authority, Sir Jack Smart—the people giving evidence were never identified and the person about whom the allegations were made was never given the opportunity to reply to those allegations.
I ask the Minister: where else but in Wakefield, where else but under the management of the Wakefield district health authority and where else but in the Yorkshire region under the chairmanship of Brian Askew, can such things occur?
An undemocratic inquiry was being held because the managements of Wakefield health authority and of the

regional health authority wanted to remove a member of the Labour party from the position of chairman of the district health authority—indeed, the last remaining chairman of a district health authority who was a member of the Labour party. One must assume that the whole situation is politically motivated.
The inquiry was totally against natural justice and against the democratic procedures that we cherish so dearly in this House. If the Minister is to be fair to those procedures, to the Health Service and to the people who use the services of Wakefield district health authority, the present situation cannot be left unchanged. A kangaroo court was held to dismiss the chairman. People gave evidence and remained anonymous. That is reminiscent of South Africa, where people give evidence facelessly behind locked doors. Here, that evidence has been used against the people who are administering the health authority.
If the Minister thinks that all that is rubbish, why does she not accept the suggestion of my hon. Friend the Member for Wakefield and conduct an inquiry into what is happening in Wakefield? That is the only way in which we can have a clear approach to this matter.
I turn now to the issue of cook-chill. There is room for further investigation there, because when the appointment of Tricon was originally vetted by the then administrator, Mr. Pritchard, the total cost was less than £8,000. However, when the district general manager was appointed, the cost increased to £49,400, without any invitation for tenders and without approval by the health authority on the question whether the increased expenditure was justifiable. The district general manager took that decision to increase expenditure to nearly £50,000. After that commitment, the health authority had to approve it.
I appeal to the Minister not to allow this to continue. Until we have some clarification, it will go on for a long time. It is important to clear the matter up, and the Minister should make that her responsibility.

The Parliamentary Under-Secretary of State for Health (Mrs. Edwina Currie): Let me start by offering the usual courtesies and congratulating the hon. Member for Wakefield (Mr. Hinchliffe) on winning the ballot. I know that he tries to take an interest in the health of his constituents, which is probably amply demonstrated by the fact that in the current Session of Parliament he has tabled 115 questions on health-related matters and thus kept Ministers well aware of his existence. He was a member of the health authority before the last election, and participated in much of the discussion leading up to the sort of decision with which the authority is now faced. The hon. Gentleman and his hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse) asked to see me last September to discuss health matters relating to their constituencies, and I believe that we had a very useful meeting.
This evening's debate takes place against a background of significant increases in National Health Service funding. This is now the country's second largest programme of expenditure, after social security. Last year the 1987–88 financial year—the nation spent over £21 billion on the NHS. This year, spending in the United Kingdom is expected to top £23·6 billion. The Secretary of State's announcements at Brighton recently bring the total


amount to he made available for nurses' pay this year to nearly £1 billion, and the total amount spent on the Health Service is over £2 billion more than last year's figure.
As for the Yorkshire regional health authority, back in 1982–83 its gross revenue spend was under £600 million. By last year it had risen to £817 million—a cash increase of 40 per cent. and a real-terms increase of 11 per cent. For this year its initial revenue allocation is a further increase to £889 million. Taking into account additional money for nurses' pay, £330 million spent by the family practitioner services and the result of its own efforts such as income generation and land sales, spending in the Yorkshire region in 1988–89 will top £1,219 million, the largest amount ever spent on health in Yorkshire. It involves more staff, better hospitals, more equipment and—most of all more patient care. I am looking to see whether the hon. Member for Wakefield is nodding but he is not. He probably does not believe me, but I must tell him that it is true.
I visited the Yorkshire region on 23 September and saw the new Dewsbury general hospital, recently completed at a cost of £18 million. We broke the ground for phase 3 and the new psychiatric wing there, costing a further £4 million. That is far better than any Labour Government has ever been able to do for the people of Dewsbury and the surrounding area. We took part in the formal opening of the Yorkshire Heartbeat programme, which will probably do as much to improve the health of local people as almost all the rest of the Health Service's activity put together.
Wakefield health authority's funding has also increased. Its initial cash allocation for 1988–89 is now over £50 million. On top of that, a considerable extra amount will come its way as a result of the clinical grading review and other items—for example, £61,000 from the waiting list money for this year for gynaecology.
The hon. Gentleman has not referred to the plans—of which is he probably aware, although they are still at an early stage—to spend £14 million on improving services in Wakefield on the site of Pinderfields hospital. Among other things, it will enable the centralisation of the maternity service on the main hospital site, thus providing a much enhanced quality of care. Wakefield has been looking after the hon. Gentleman's lady constituents far better than used to be the case. I hope that he recognises that.
I am sure the hon. Gentleman knows that over the past five years the number of in-patients treated in Wakefield has increased by 23 per cent., the number of out-patient attendances has increased by over 16,000 to over 140,000 per annum, and the number of day cases per annum has doubled. The waiting list is not only under control, but a great deal better than the England average, and it is a commendable reflection on what has been going on there.
Let me turn to the dismissal of Sir Jack Smart. The hon. Gentleman said that his sacking in no way resolved the matters facing Wakefield health authority. I wrote down what he said. How right he is. That was the only sensible comment that the hon. Gentleman made. The removal from office of Sir Jack Smart cannot come as any surprise to those familiar with the long and unhappy saga surrounding Wakefield health authority. He was dismissed from the chairmanship of the health authority on 3 October because for him to continue in office would not have been in the best interests of the Health Service in that district. The decision was based not solely on the regional

health authority inquiry, but on a wide range of considerations over a considerable period. The hon. Gentleman may recall that a motion of no confidence was passed against Sir Jack Smart by his own health authority while he was in the chair. That situation could not continue.
I speak of Sir Jack in sadness rather than anger for he has given many years of sturdy public service to the Health Service and elsewhere. The members of Wakefield health authority, who carry collective responsibility, should not seek to fix the blame on one man. What patients there need is leadership and decisions taken in the interests of patients, not in a factional or partisan mode. The behaviour of some people on the authority has been a disgrace and is probably best put behind them.
The health authority is now faced with a large group of decisions which it is required to take, not least about cook-chill, Snapethorpe hospital, the appalling levels of heart disease and the high rate of measles and other preventable diseases. Ministers now hope that the authority will get on with those matters and put its troubles behind it.
I remind the hon. Member for Normanton (Mr. O'Brien), who spoke so eloquently in favour of Sir Jack Smart, that it was his hon. Friend the Member for Wakefield who, according to the Wakefield Express of 4 September 1987, wrote to Sir Jack urging him to resign, saying:
I have to express my total lack of confidence in your chairmanship.
Labour Members may like to discuss that between themselves. We are now proceeding with the careful consideration of the appointment of the new chairman and hope to make an announcement shortly. Ministers are satisfied that correct procedures have been followed in the dismissal of Sir Jack, and there will be no further inquiries.
The previous vice-chairman has also given us good service. His term of office came to an end on 30 September, and we would like to put on record our thanks for his many years of service. Health authority members will have an opportunity to elect his successor at a meeting on Friday 28 October, and we hope that they will get on with that, too.
Opposition Members know that Yorkshire regional health authority established a group of acknowledged experts to advise on the safe introduction of cook-chill. I have here the group's report, which was published on 30 September 1987. It confirmed the safety and value of cook-chill in general and concluded that Wakefield's proposals were satisfactory, subject to some further work. Wakefield health authority got on and did that further work and produced a revised policy which satisfied the expert group. This includes the regeneration of food at ward level. Its implementation was agreed on 29 July when additional capital funds of £350,000 were provided by the regional health authority.
Our view has always been that issues to do with cook-chill are essentially local ones for local managers to sort out and we expect them to get on with it. [Interruption.] By "them" I mean the health authority, not just the district manager or a single individual. The efforts made tonight to pillory individuals are a disgrace. To cast those slurs on individuals in this Chamber is an abuse of parliamentary privilege and I would have thought that it was against all the principles of Socialism.
The Wakefield health authority, in its paper to its own authority, says that it anticipates savings of at least £200,000 a year. The main effect will be a reduction in the number of posts needed to operate catering, a reduction in the amount of overtime, and so on. That, of course, will affect members of NUPE.
What the hon. Members for Wakefield and for Halifax (Mrs. Mahon) forgot to tell the House in their allegations about the interests of other people outside, who cannot respond, is that they are supported by NUPE. On that sort of basis I would have expected them to say that those who have paid their election expenses are concerned about their jobs. That is a legitimate concern, but it also reflects on the important fact that the health authority will have a substantial additional sum a year to spend on patients. In the end, we are here to look after patients, not the full-time

officials of NUPE, COHSE and one or two other unions.
A prominent Health Service publication likened events in Wakefield to a Health Service soap opera—"Dallas" without the sex. This was a sad event. Ultimately, it is our responsibility to all involved to ask them to examine and readjust their motives and attitudes and to give the Wakefield district health authority a fresh start, for the sake of those who have been largely forgotten in all this and barely mentioned by Opposition Members in their tirade against good and honourable men and women in Wakefield. We have to think about the patients and patient care, and that is what I propose to do.

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at ten minutes to Eleven o'clock.